The growth and function of organs such as pancreatic islets adapt to meet physiological challenges and maintain metabolic balance, but the mechanisms controlling these facultative responses are unclear^,. Diabetes in patients treated with calcineurin inhibitors such as cyclosporin A indicates that calcineurin/nuclear factor of activated T-cells (NFAT) signalling might control adaptive islet responses, but the roles of this pathway in β-cells in vivo are not understood. Here we show that mice with a β-cell-specific deletion of the calcineurin phosphatase regulatory subunit, calcineurin b1 (Cnb1), develop age-dependent diabetes characterized by decreased β-cell proliferation and mass, reduced pancreatic insulin content and hypoinsulinaemia. Moreover, β-cells lacking Cnb1 have a reduced expression of established regulators of β-cell proliferation^,,. Conditional expression of active NFATc1 in Cnb1-deficient β-cells rescues these defects and prevents diabetes. In normal adult β-cells, conditional NFAT activation promotes the expression of cell-cycle regulators and increases β-cell proliferation and mass, resulting in hyperinsulinaemia. Conditional NFAT activation also induces the expression of genes critical for β-cell endocrine function, including all six genes mutated in hereditary forms of monogenic type 2 diabetes. Thus, calcineurin/NFAT signalling regulates multiple factors that control growth and hallmark β-cell functions, revealing unique models for the pathogenesis and therapy of diabetes.