Although persistent elevations in circulating glucose concentrations promote compensatory increases in pancreatic islet mass, unremitting insulin resistance causes deterioration in beta cell function that leads to the progression to diabetes. Here, we show that mice with a knockout of the CREB coactivator CRTC2 in beta cells have impaired oral glucose tolerance due to decreases in circulating insulin concentrations. CRTC2 was found to promote beta cell function in part by stimulating the expression of the transcription factor MafA. Chronic hyperglycemia disrupted cAMP signaling in pancreatic islets by activating the hypoxia inducible factor (HIF1)-dependent induction of the protein kinase A inhibitor beta (PKIB), a potent inhibitor of PKA catalytic activity. Indeed, disruption of the PKIB gene improved islet function in the setting of obesity. These results demonstrate how crosstalk between nutrient and hormonal pathways contributes to loss of pancreatic islet function.