Chronic exposure of beta-cells to supraphysiologic glucose concentrations results in decreased insulin gene transcription. Here we identify the basic leucine zipper transcription factor, CCAAT/enhancer-binding protein beta (C/EBPbeta), as a repressor of insulin gene transcription in conditions of supraphysiological glucose levels. C/EBPbeta is expressed in primary rat islets. Moreover, after exposure to high glucose concentrations the beta-cell lines HIT-T15 and INS-1 express increased levels of C/EBPbeta. The rat insulin I gene promoter contains a consensus binding motif for C/EBPbeta (CEB box) that binds C/EBPbeta. In non-beta-cells C/EBPbeta stimulates the activity of the rat insulin I gene promoter through the CEB box. Paradoxically, in beta-cells C/EBPbeta inhibits transcription, directed by the promoter of the rat insulin I gene by direct protein-protein interaction with a heptad leucine repeat sequence within activation domain 2 of the basic helix-loop-helix transcription factor E47. This interaction leads to the inhibition of both dimerization and DNA binding of E47 to the E-elements of the insulin promoter, thereby reducing functionally the transactivation potential of E47 on insulin gene transcription. We suggest that the induction of C/EBPbeta in pancreatic beta-cells by chronically elevated glucose levels may contribute to the impaired insulin secretion in severe type II diabetes mellitus.