The generation and transport of a 1‐MV, 5‐kA, 50‐ns annular proton beam has been studied. The diode is magnetically insulated with a full‐cusp field geometry. Beam transport in a 6‐kG axial magnetic field is measured for injection into vacuum and neutral gas. The neutral gas background is supplied by a fast puff valve system. The gas background is found to enhance the space‐charge neutralization of the beam. Under these conditions the beam divergence is <1° and the annular profile is maintained throughout the 30‐cm transport region. We discuss a simplified model of the beam injection process to explain the experimental results.