Regulation of cellular iron homeostasis is crucial as both iron excess and deficiency cause hematological and neurodegenerative diseases. Here we show that mice lacking iron-regulatory protein 2 (Irp2), a regulator of cellular iron homeostasis, develop diabetes. Irp2 post-transcriptionally regulates the iron-uptake protein transferrin receptor 1 (TfR1) and the iron-storage protein ferritin, and dysregulation of these proteins due to Irp2 loss causes functional iron deficiency in beta cells. This impairs Fe-S cluster biosynthesis, reducing the function of Cdkal1, an Fe-S cluster enzyme that catalyzes methylthiolation of t(6)A37 in tRNA(UUU)(Lys) to ms(2)t(6)A37. As a consequence, lysine codons in proinsulin are misread and proinsulin processing is impaired, reducing insulin content and secretion. Iron normalizes ms(2)t(6)A37 and proinsulin lysine incorporation, restoring insulin content and secretion in Irp2(-/-) beta cells. These studies reveal a previously unidentified link between insulin processing and cellular iron deficiency that may have relevance to type 2 diabetes in humans.