OBJECTIVE To establish the role of the transcription factor Pax4 in pancreatic islet expansion and survival in response to physiological stress and its impact on glucose metabolism, we generated transgenic mice conditionally and selectively overexpressing Pax4 or a diabetes-linked mutant variant (Pax4R129 W) in β-cells. RESEARCH DESIGN AND METHODS Glucose homeostasis and β-cell death and proliferation were assessed in Pax4- or Pax4R129 W-overexpressing transgenic animals challenged with or without streptozotocin. Isolated transgenic islets were also exposed to cytokines, and apoptosis was evaluated by DNA fragmentation or cytochrome C release. The expression profiles of proliferation and apoptotic genes and β-cell markers were studied by immunohistochemistry and quantitative RT-PCR. RESULTS Pax4 but not Pax4R129 W protected animals against streptozotocin-induced hyperglycemia and isolated islets from cytokine-mediated β-cell apoptosis. Cytochrome C release was abrogated in Pax4 islets treated with cytokines. Interleukin-1β transcript levels were suppressed in Pax4 islets, whereas they were increased along with NOS2 in Pax4R129 W islets. Bcl-2, Cdk4, and c-myc expression levels were increased in Pax4 islets while MafA, insulin, and GLUT2 transcript levels were suppressed in both animal models. Long-term Pax4 expression promoted proliferation of a Pdx1-positive cell subpopulation while impeding insulin secretion. Suppression of Pax4 rescued this defect with a concomitant increase in pancreatic insulin content. CONCLUSIONS Pax4 protects adult islets from stress-induced apoptosis by suppressing selective nuclear factor-κB target genes while increasing Bcl-2 levels. Furthermore, it promotes dedifferentiation and proliferation of β-cells through MafA repression, with a concomitant increase in Cdk4 and c-myc expression.