Aims Studies suggest that type 1 diabetes (T1D) contributes to impaired insulin sensitivity (IS). Most children with T1D experience partial remission but the knowledge regarding the magnitude and implications of impaired IS in this phase is limited. Therefore, we investigate the impact of IS on the partial remission phase. Methods In a longitudinal study of children and adolescents, participants were seen at three clinical visits during the first 14.5 months after diagnosis of T1D. Partial remission was defined as IDAA(1c) (HbA(1c) (%) + 4*daily insulin dose) 300 pmol/L. Participants were characterized by (i) remission or non-remission and (ii) stimulated c-peptide levels above or below 300 pmol/L. IS, body mass index (BMI), total body fat, sex, age, pubertal status and ketoacidosis at onset were compared. Results Seventy-eight children and adolescents aged 3.3-17.7 years were included. At 14.5 months post-diagnosis, 54.5% of the participants with stimulated c-peptide > 300 pmol/L were not in partial remission. Participants not in remission had significant lower IS 2.5 (p = 0.032), and 14.5 (p = 0.022) months after diagnosis compared to participants in partial remission with similar c-peptide levels. IS did not fluctuate during the remission phase. Conclusions A number of children and adolescents have impaired IS in the remission phase of paediatric T1D and are not in remission 14.5 months after diagnosis despite stimulated c-peptide > 300 pmol/L.