A cockatiel (Nymphicus hollandicus) examined because of weight loss, polydipsia, and polyuria was diagnosed with diabetes mellitus based on the presence of glucosuria and marked hyperglycemia. Medical attempts to manage the diabetes mellitus were unsuccessful, and the bird was euthanatized. Histopathologic examination of the pancreas revealed a chronic active pancreatitis with herpesviral inclusions in many of the pancreatic acinar and duct cells. Psittacid herpesvirus-1 (PsHV-1) DNA was amplified from the lesion by polymerase chain reaction. Sequencing of the amplicon showed it to be the genotype 1 variant, which is most commonly associated with Pacheco's disease, an acute rapidly fatal systemic infection. The findings in this case suggest that the PsHV-1 genotype may also cause a localized disease of the pancreas. Infection with this virus should be considered as a differential diagnosis in birds with pancreatitis with or without diabetes mellitus.