Demyelinating acute transverse myelitis may be the first presentation of multiple sclerosis or remain a clinically isolated syndrome. North Canterbury, New Zealand provides a well circumscribed population to study acute transverse myelitis. Objective: to identify prognostic features, clinical outcomes and incidence of ATM in North Canterbury, New Zealand. All patients with acute transverse myelitis as a first neurological presentation diagnosed from January 2001 to December 2005 at a single institution providing all neurological care for North Canterbury were assessed for clinical data, MRI findings, cerebrospinal fluid results and clinical outcomes. CHAMPS, Barkhof/Tintore and Swanton criteria were applied to brain MRI. Sixty-one patients were identified with a mean duration of follow-up of 30 +/- 17 months. Fifty percent of patients with ATM with brain lesions by CHAMPS criteria converted to clinically definite multiple sclerosis. No patients with idiopathic acute transverse myelitis converted to clinically definite multiple sclerosis. There was a strong association with conversion to clinically definite multiple sclerosis and abnormal brain MRI by CHAMPS criteria (hazard ratio, 5.63; 1.83-17.3), Barkhof/Tintore criteria (hazard ratio, 6.43; 2.31-17.9) and Swanton criteria (hazard ratio, 4.53; 1.67-12.3). The age standardized annual incidence of acute transverse myelitis was 24.6 (18.2-31.1) per million, of definite and possible idiopathic acute transverse myelitis was 6.2 (2.9-9.6) per million, and of acute transverse myelitis with brain lesions was 4.7 (1.9-7.6) per million. Patients with idiopathic acute transverse myelitis are at low risk for conversion to clinically definite multiple sclerosis. Abnormal brain MRI by CHAMPS criteria is a sensitive predictor of conversion to clinically definite multiple sclerosis. The annual incidence of acute transverse multiple sclerosis in North Canterbury, New Zealand is significantly higher than previously reported.