AIMS/HYPOTHESIS: Pancreatic beta cells maintain glucose homeostasis and beta cell dysfunction is a major risk factor in developing diabetes. Therefore, understanding the developmental regulatory networks that define a fully functional beta cell is important for elucidating the genetic origins of the disease. Aldehyde dehydrogenase activity has been associated with stem/progenitor cells and we have previously shown that Aldh1b1 is specifically expressed in pancreas progenitor pools. Here we address the hypothesis that Aldh1b1 may regulate the timing of the appearance and eventual functionality of beta cells. METHODS: We generated an Aldh1b1-knockout mouse line (Aldh1b1 (tm1lacZ)) and used this to study pancreatic development, beta cell functionality and glucose homeostasis in the absence of Aldh1b1 function. RESULTS: Differentiation in the developing pancreas of Aldh1b1 (tm1lacZ) null mice was accelerated. Transcriptome analyses of newborn and adult islets showed misregulation of key beta cell transcription factors and genes crucial for beta cell function. Functional analyses showed that glucose-stimulated insulin secretion was severely compromised in islets isolated from null mice. Several key features of beta cell functionality were affected, including control of oxidative stress, glucose sensing, stimulus-coupling secretion and secretory granule biogenesis. As a result of beta cell dysfunction, homozygous mice developed glucose intolerance and age-dependent hyperglycaemia. CONCLUSIONS/INTERPRETATION: These findings show that Aldh1b1 influences the timing of the transition from the pancreas endocrine progenitor to the committed beta cell and demonstrate that changes in the timing of this transition lead to beta cell dysfunction and thus constitute a diabetes risk factor later in life. Gene Expression Omnibus (GEO) accession: GSE58025.