β cell dysfunction is an important component of type 2 diabetes, but the molecular basis for this defect is poorly understood. The transcriptional coactivator PGC-1α mRNA and protein levels are significantly elevated in islets from multiple animal models of diabetes; adenovirus-mediated expression of PGC-1α to levels similar to those present in diabetic rodents produces a marked inhibition of glucose-stimulated insulin secretion from islets in culture and in live mice. This inhibition coincides with changes in metabolic gene expression associated with impaired β cell function, including the induction of glucose-6-phosphatase and suppression of GLUT2, glucokinase, and glycerol-3-phosphate dehydrogenase. These changes result in blunting of the glucose-induced rise in cellular ATP levels and membrane electrical activity responsible for Ca²⁺ influx and insulin exocytosis. These results strongly suggest that PGC-1α plays a key functional role in the β cell and is involved in the pathogenesis of the diabetic phenotype.