The McDonald Islands (53°S, 73°E) originally comprised three small islands that lie on the Kerguelen Plateau, 44 km west of Heard Island. No volcanic activity was observed since their discovery in 1874 until 1997, when two passing ships recorded major changes and eruptive behaviour. A 2001 satellite image showed that the main island had doubled its area. This paper reports observations made from a cruise ship in November 2002, supplemented by a high-resolution satellite image acquired in March 2003. A new volcanic complex comprises lava domes, spines and flows, all assumed to be phonolitic, similar to the older volcanic rocks. The complex shows dormant volcanic activity, with numerous fumaroles, recent spine evolution and lava flows. Changes in relative sea level have connected Flat and McDonald Islands. A spit about 1km long with extensive shoals beyond, now extends eastward from McDonald Island and presents new hazards to shipping. Biological changes include colonization by king penguins (Aptenodytes patagonica), previously absent, and a large reduction in numbers of formerly widespread macaroni penguins (Eudyptes chrysolophus chrysolophus).