Mutations in the hepatocyte nuclear factor-1alpha (HNF-1alpha) have been linked to subtype 3 of maturity-onset diabetes of the young (MODY3), which is characterized by a primary defect in insulin secretion. The role of HNF-1alpha in the regulation of pancreatic beta-cell function was investigated. Gene manipulation allowed graded overexpression of HNF-1alpha and controlled dominant-negative suppression of HNF-1alpha function in insulinoma INS-1 cells. We show that HNF-1alpha is essential for insulin gene transcription, as demonstrated by a pronounced decrease in insulin mRNA expression and in insulin promoter activity under dominant-negative conditions. The expression of genes involved in glucose transport and metabolism including glucose transporter-2 and L-type pyruvate kinase is also regulated by HNF-1alpha. Loss of HNF-1alpha function leads to severe defects in insulin secretory responses to glucose and leucine, resulting from impaired glucose utilization and mitochondrial oxidation. The nutrient-evoked ATP production and subsequent changes in plasma membrane potential and intracellular Ca2+ were diminished by suppression of HNF-1alpha function. These results suggest that HNF-1alpha function is essential for maintaining insulin storage and nutrient-evoked release. The defective mitochondrial oxidation of metabolic substrates causes impaired insulin secretion, indicating a molecular basis for the diabetic phenotype of MODY3 patients.