Pancreatic β-cell dysfunction is a common feature of type 2 diabetes. Earlier, we had cloned IG20 cDNA from a human insulinoma and had shown that IG20/MADD can encode six different splice isoforms that are differentially expressed and have unique functions, but its role in β-cell function was unexplored. To investigate the role of IG20/MADD in β-cell function, we generated conditional knockout (KMA1ko) mice. Deletion of IG20/MADD in β-cells resulted in hyperglycemia and glucose intolerance associated with reduced and delayed glucose-induced insulin production. KMA1ko β-cells were able to process insulin normally but had increased insulin accumulation and showed a severe defect in glucose-induced insulin release. These findings indicated that IG20/MADD plays a critical role in glucose-induced insulin release from β-cells and that its functional disruption can cause type 2 diabetes. The clinical relevance of these findings is highlighted by recent reports of very strong association of the rs7944584 single nucleotide polymorphism (SNP) of IG20/MADD with fasting hyperglycemia/diabetes. Thus, IG20/MADD could be a therapeutic target for type 2 diabetes, particularly in those with the rs7944584 SNP.