Type 5 Diabetes or MODY-5 has recently emerged as a rare yet distinct phenotype among pediatric diabetes disorders, characterized predominantly by mutations in critical genes such as HNF1B and PPARG. Unlike more common diabetes types, this atypical form demonstrates extensive multisystem involvement, presenting clinically through diverse manifestations including renal cysts, pancreatic hypoplasia, growth disturbances, and neurological complications. Genetic analyses underscore its significant heterogeneity, illustrating a complex interplay among genetic mutations, epigenetic modifications, and environmental triggers that collectively shape its distinct pathogenesis. Molecular disruptions prominently include alterations in NF-κB signaling pathways, increased oxidative stress, mitochondrial dysfunction, and heightened profibrotic TGF-β activity, leading to early and severe multisystem complications. Despite these insights, clinical misclassification remains frequent, largely because diagnostic tools continue to prioritize conventional parameters such as HbA1c and fasting glucose rather than molecular diagnostics. Moreover, the absence of validated biomarkers specific to Type 5 Diabetes further impedes timely and precise diagnosis, underscoring critical gaps in current clinical practice. Addressing these diagnostic and therapeutic gaps necessitates expanded genetic screening, enhanced clinician education, and the establishment of subtype-specific clinical guidelines. This review proposes a structured framework to drive future diagnostic and therapeutic advancements, ultimately facilitating personalized management and improved outcomes for affected pediatric populations.