Pseudoephedrine is a precursor often diverted into the illegal manufacture of amphetamine type substances (ATS). The aim of this study was to evaluate the effectiveness of a linked electronic medication recording system (LEMS) established in Australian pharmacies in 2005 for preventing the diversion of pseudoephedrine. The number of illegal ATS laboratories detected in each jurisdiction of Australia from 1996-1997 to 2004-2005 were analysed by linear regression nationally and by each jurisdiction. The statistical significance of seizures in 2005-2006 was based on the comparison of the observed value to the 95% prediction confidence intervals calculated from the historical data for each jurisdiction and nationally. Pharmacies in Queensland commenced an LEMS in late 2005 to minimise retail pseudoephedrine diversion. The number of ATS laboratories seized in 2005-2006 in Queensland was significantly lower (P < 0.05) than predicted by historical data. For all other jurisdictions and nationally the totals of laboratories seized in 2005-2006 were not significantly different from predicted values. The significant decline in ATS illegal laboratories seized in Queensland in 2005-2006 suggests the effective use of LEMS in pharmacies to minimise pseudoephedrine diversion. In order to evaluate a national LEMS, more frequent data on numbers of linked pharmacies, ATS laboratories seized and indicators of pseudoephedrine sales and misuse are required. Testing the use of LEMS by pharmacies for preventing the diversion of other medicines seems appropriate.