A neurological disease of young Pekin ducks characterized by ataxia, lameness, and paralysis was observed at several duck farms in Malaysia in 2012. Gross pathological lesions were absent or inconsistent in most of the cases, but severe and consistent microscopic lesions were found in the brain and spinal cord, characterized by non-purulent panencephalomyelitis. Several virus isolates were obtained in embryonated duck eggs and in cell cultures (Vero and DF-1) inoculated with the brain homogenates of affected ducks. After exclusion of other viruses, the isolates were identified as a flavivirus by flavivirus-specific reverse transcription-polymerase chain reaction (RT-PCR) assays. Inoculation of 2-week-old Pekin ducks with a flavivirus isolate by the subcutaneous or intramuscular route resulted in typical clinical signs and histological lesions in the brain and spinal cord. The inoculated virus was detected by RT-PCR from organ samples of ducks with clinical signs and histological lesions. With a few days delay, the disease was also observed among co-mingled contact control birds. Phylogenetic analysis of NS5 and E gene sequences proved that the isolates were representatives of a novel phylogenetic group within clade XI (Ntaya virus group) of the Flavivirus genus. This Malaysian Duck Tembusu Virus (DTMUV), named Perak virus, has moderate genomic RNA sequence similarity to a related DTMUV identified in China. In our experiment the Malaysian strain of DTMUV could be transmitted in the absence of mosquito vectors. These findings may have implications for the control and prevention of this emerging group of flaviviruses.