D iabetes results from an inadequate mass of functional β cells, due to either β cell loss caused by immune assault or the lack of compensation to overcome insulin resistance. Elucidating the mechanisms that regulate β cell mass has important ramifications for fostering β cell regeneration and the treatment of diabetes. We report here that Skp2, a substrate recognition component of Skp1–Cul1–F-box (SCF) ubiquitin ligase, played an essential and specific role in regulating the cellular abundance of p27 and was a critical determinant of β cell proliferation. In Skp2^–/– mice, accumulation of p27 resulted in enlarged polyploid β cells as a result of endoreduplication replacing proliferation. Despite β cell hypertrophy, Skp2^–/– mice exhibited diminished β cell mass, hypoinsulinemia, and glucose intolerance. Increased insulin resistance resulting from diet-induced obesity caused Skp2^–/– mice to become overtly diabetic, because β cell growth in the absence of cell division was insufficient to compensate for increased metabolic demand. These results indicate that the Skp2-mediated degradation pathway regulating the cellular degradation of p27 is essential for establishing β cell mass and to respond to increased metabolic demand associated with insulin resistance.