Zinc co-crystallizes with insulin in dense core secretory granules, but its role in insulin biosynthesis, storage and secretion is unknown. In this study we assessed the role of the zinc transporter ZnT8 using ZnT8-knockout (ZnT8^−/−) mice. Absence of ZnT8 expression caused loss of zinc release upon stimulation of exocytosis, but normal rates of insulin biosynthesis, normal insulin content and preserved glucose-induced insulin release. Ultrastructurally, mature dense core insulin granules were rare in ZnT8^−/− beta cells and were replaced by immature, pale insulin “progranules,” which were larger than in ZnT8^+/+ islets. When mice were fed a control diet, glucose tolerance and insulin sensitivity were normal. However, after high-fat diet feeding, the ZnT8^−/− mice became glucose intolerant or diabetic, and islets became less responsive to glucose. Our data show that the ZnT8 transporter is essential for the formation of insulin crystals in beta cells, contributing to the packaging efficiency of stored insulin. Interaction between the ZnT8^−/− genotype and diet to induce diabetes is a model for further studies of the mechanism of disease of human ZNT8 gene mutations.