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Neonatal Diabetes Mellitus (NDM) is a rare, heterogeneous monogenic disorder typically presenting within the first six months of life. Unlike type 1 or type 2 diabetes, NDM is caused by single-gene mutations that disrupt pancreatic β-cell function or development. With the advent of next-generation sequencing, the genetic spectrum of NDM has expanded significantly, necessitating a shift from symptomatic management to precision medicine. This narrative review summarizes the genetic basis and pathogenic mechanisms of NDM, categorizing them into three major pathways: (1) ATP-sensitive potassium (K_ATP) channelopathies (e.g., ABCC8, KCNJ11), where gain-of-function mutations inhibit insulin secretion; (2) Transcription factor defects (e.g., GLIS3, PAX6, GATA6), which impair pancreatic development and often present with syndromic features; and (3) Endoplasmic reticulum (ER) stress-mediated β-cell apoptosis, exemplified by WFS1 mutations. Furthermore, we highlight the clinical complexity of these mutations, including the "biphasic phenotype" observed in ABCC8 and HNF1A variants. Understanding these molecular mechanisms is critical for clinical decision-making. We discuss the transformative impact of genetic diagnosis in treatment, particularly the successful transition from insulin to oral sulfonylureas in patients with K_ATP channel mutations, and emphasize the importance of early genetic testing to optimize glycemic control and prevent complications.