Insulin secretion by beta-cells of pancreatic islets is regulated by various soluble factors including glucose and hormones. The importance of direct cell-cell communication among beta-cells or between beta-cells and other cell types for such regulation has remained unclear, however. Transmembrane proteins Src homology 2 domain-containing protein tyrosine phosphatase substrate-1 (SHPS-1) and its ligand CD47 interact through their extracellular regions and contribute to intercellular communication. We now show that both SHPS-1 and CD47 are prominently expressed in beta-cells of the pancreas. The plasma insulin level in the randomly fed state was markedly reduced in mice that express a mutant form of SHPS-1 lacking most of the cytoplasmic region compared with that in wild-type (WT) mice, although the blood glucose concentrations of the two types of mice were similar. This reduction in the plasma insulin level of SHPS-1 mutant mice was even more pronounced in animals maintained on a high-fat diet. Glucose tolerance was also markedly impaired in SHPS-1 mutant mice on a high-fat diet, whereas both peripheral insulin sensitivity and the insulin content of the pancreas in the mutant animals were similar to those of WT mice. Glucose-stimulated insulin secretion was similar for islets isolated from WT or SHPS-1 mutant mice. The impaired glucose tolerance of SHPS-1 mutant mice was ameliorated by treatment with the alpha2-adrenergic antagonist yohimbine. These results suggest that SHPS-1 promotes insulin secretion from beta-cells and thereby protects against diabetes. Preventing of alpha2-adrenergic receptor-mediated inhibition of insulin secretion may partly participate in such a function of SHPS-1.