Diphtheria is a potentially fatal respiratory disease caused by toxigenic Corynebacterium diphtheriae. Diphtheria is rare in developed countries but remains endemic in parts of Asia, the South Pacific, the Middle East, Eastern Europe and the Caribbean. A diphtheria toxoid vaccine is available and infection is also readily treatable with penicillin or erythromycin. Although resistance to erythromycin has been recognised, Penicillin and β -lactam resistance in toxigenic diphtheria has not yet been described. Here we report a case of fatal respiratory diphtheria caused by toxigenic C. diphtheriae resistant to penicillin and other β-lactam antibiotics. Toxigenic C. diphtheriae strain BQ11 was isolated from an unvaccinated adult female in April 2011 in Australia. The infection was likely acquired from a vaccinated close personal contact with asymptomatic C. diphtheriae carriage. Using long-read whole genome sequencing we assembled the genome sequence of C. dipththeriae BQ11 to determine the genetic mechanisms of resistance. We found a 6,682 bp β-lactam resistance gene cassette that is not found in the genomes of β-lactam susceptible C. diphtheriae. Surprisingly, this element has been mobilised into the genome of BQ11 as a novel transposon. Remarkably, we found that transposon copy number was highly dynamic. When cultured with exposure to meropenem, selective pressure drives a rapid increase in transposon copy number and a corresponding change from a carbapenem susceptible to a carbapenem resistant phenotype.This case of fatal respiratory toxigenic diphtheria caused by β-lactam resistant C. diphtheriae highlights the ongoing threat posed by the potential introduction of diphtheria from endemic regions to non-immune or partially immune individuals and demonstrates threat of emergent antimicrobial resistance within this species.