Processed pseudogenes are non-functional copies of normal genes that arise by a process of mRNA retrotransposition. The human genome contains thousands of pseudogenes; however, knowledge regarding their biological role is limited. Previously, we demonstrated that high mobility group A1 (HMGA1) protein regulates the insulin receptor (INSR) gene and that two diabetic patients demonstrated a marked destabilization of HMGA1 mRNA. In this paper we report that this destabilization of HMGA1 mRNA is triggered by enhanced expression of RNA from an HMGA1 pseudogene, HMGA1-p. Targeted knockdown of HMGA1-p mRNA in patient cells results in a reciprocal increase in HMGA1 mRNA stability and expression levels with a parallel correction in cell-surface INSR expression and insulin binding. These data provide evidence for a regulatory role of an expressed pseudogene in humans and establishes a novel mechanistic linkage between pseudogene HMGA1-p expression and type 2 diabetes mellitus.