OBJECTIVES: The International Classification of Disease, 10th Revision (ICD-10) was introduced worldwide beginning in the late 1990s. Because there have been no published data on the quality of coding using ICD-10, the aim of our analysis is to assess the quality of ICD-10 coding in routinely collected hospital discharge data from Australia, which began using ICD-10 in 1998. METHODS: Audit data from the years 1998-1999 (n = 7004) and 2000-2001 (n = 7631), excluding same-day chemotherapy and dialysis cases, were used in data analysis. Quality measures included prevalence comparisons, sensitivity, positive predictive value (PPV), and the kappa statistic. RESULTS: Comparison of the audit sample to public hospital discharges showed little difference in age and gender, with audited cases more likely to be overnight stays. There was no difference in the median number of hospital assigned diagnosis and procedure codes per discharge. Agreement of the principal diagnosis code was 85% at the 3-digit level and 79% at the 4-digit level in 1998-1999; this rate had improved to 87% and 81% in 2000-2001. Principal procedure code agreement was 85% in 1998-1999 and 83% in 2000-2001 at the 5-digit level, and 81% and 80% at the 7-digit level, respectively. Specific major diagnoses, comorbid diagnoses, major procedures, and minor procedures showed good-to-excellent coding quality. CONCLUSIONS: The transition to ICD-10 has occurred with no loss of data quality, with data showing a high level of reliability and adherence to coding standards. When consideration is given to the nature of the analysis, administrative data can provide highly reliable population-based estimates of hospitalization rates.