Heterozygous mutations in the genes encoding transcriptional regulators hepatocyte nuclear factor (HNF)-1α and HNF-4α cause a form of diabetes known as maturity-onset diabetes of the young (MODY). Haploinsufficiency of HNF-1α or HNF-4α results in MODY because of defective function of pancreatic islet cells. In contrast, homozygous null mutations in mouse models lead to widespread and profound gene expression defects in multiple cell types. Thus, it is not surprising that HNF-1α function is now known to have distinct properties in pancreatic β-cells. It controls a complex tissue-selective genetic network that is activated when pancreatic cells differentiate, and allows these cells to maintain critical specialized functions. The network contains an indispensable core component formed by a positive cross-regulatory feedback circuit between HNF-1α and HNF-4α. This type of circuit configuration can exhibit a switch-like behavior with two stable states. In the default active state, it can serve to perpetuate network activity in differentiated β-cells. However, the loss of one HNF-1α or HNF-4α allele can increase the probability that the feedback circuit is permanently switched off, resulting in decreased expression of all four alleles selectively in β-cells. Such a model can serve to rationalize key aspects of the pathogenic mechanism in MODY.