Complement component C4 (C4) is a highly variable complement pathway gene situated ∼500 kb from DRB1 and DQB1, the genes most strongly associated with many autoimmune diseases. Variations in C4 copy number (CN), length, and isotype create a highly diverse gene cluster in which insertion of an endogenous retrovirus in the ninth intron of C4, termed HERV-K(C4), is a notable component. We investigated the relationship between C4 variation/CN and type 1 diabetes. We found that individuals with type 1 diabetes have significantly fewer copies of HERV-K(C4) and that this effect is not solely due to linkage with known major histocompatibility complex class II susceptibility alleles. We show that HERV-K(C4) is a novel marker of type 1 diabetes that accounts for the disease association previously attributed to some key HLA-DQB1 alleles, raising the possibility that this retroviral insertion element contributes to functional protection against type 1 diabetes.