The number of under-fives in Europe with type 1 diabetes is set to double between 2005 and 2020, say experts.
The researchers, from Ireland and Hungary, warn cases in older children will also rise substantially.
Writing in The Lancet, they say genetics alone cannot account for the rapid rise, and suggest lifestyle factors are likely to play a role.
The study is based on 29,311 cases of type 1 diabetes recorded in 20 European countries between 1989 and 2003.
Type 1 diabetes is caused by insulin deficiency, and must be treated with regular injections of the hormone.
In the general population it accounts for only 10% of total diabetes cases, but is much more common than the type 2 version in children.
The researchers, from Queen's University, Belfast, and Pecs University, Hungary, found the overall incidence of type 1 diabetes rose by 3.9% per year.
However, among the under-fives it was 5.4% per year, and in the five to nine age group it was 4.3% per year.
They calculated that, on present trends, 24,400 new cases will be diagnosed in children under 15 in 2020, including 7,142 cases in the under-fives.
The total number of cases of type 1 diabetes among European children under 15 is predicted to rise from 93,584 in 2005 to 159,767 in 2020 - a 70% increase.
Among the under-fives, the total number of cases is predicted to double, from 9,955 in 2005 to 20,113 in 2020.
In the UK, where type 1 diabetes appears to be more common than elsewhere in Europe, the predicted rises are bigger still.
The researchers predict the total number of cases in the under-15s will rise by nearly 80% from 18,622 in 2005 to 33,289 in 2020.
And among the under-fives, they expect to see a 123% rise, from 1,975 in 2005 to 4,402 in 2020.
The researchers say the increase in type 1 diabetes has been so rapid that it cannot be blamed on genetic factors alone.
They also point out that the highest increases have been seen in Eastern Europe, where lifestyle habits are changing more rapidly than in richer Western European nations.
Researcher Dr Chris Patterson said: "The children of older mums are at slightly increased risk of type 1 diabetes as are children born by Caesarean section and children with rapid weight gain early in life, while breast-fed children are at slightly decreased risk.
"Infections and viruses may also play a role. But currently none of these risk factors can be said to be responsible for the increase, the cause of which remains largely unknown."
The researchers warn that it is likely that hospitals will see more patients with severe diabetes complications presenting at a younger age.
These can include the potentially life-threatening condition ketoacidosis, in which the acidity of the blood is raised by the unregulated breakdown of fats and proteins by the liver.
Not only do young children with type 1 diabetes tend to be diagnosed late, and so have a higher risk of complications, they potentially face a lifetime of problems - bad news for them, and for the health care systems who must look after them.
Writing in the journal, the researchers said: "In the absence of any effective means to prevent type 1 diabetes, European countries need to ensure appropriate planning of services and that resources are in place to provide high-quality care for the increased numbers of children who will be diagnosed with diabetes in future years."
Dr Iain Frame, director of research at the charity Diabetes UK, described the research as "worrying".
"Many people live full and healthy lives, however, the longer the person has diabetes the higher the risk of complications such as heart disease, kidney failure and blindness.
"However, a lot more research is needed before we can come to any concrete conclusions about the causes of this rise in type 1 diabetes in younger children."