Humans with heterozygous loss-of-function mutations in the hepatocyte nuclear factor-1α (HNF1α) gene develop β-cell–deficient diabetes (maturity-onset diabetes of the young type 3), indicating that HNF1α gene dosage is critical in β-cells. However, whether increased HNF1α expression might be beneficial or deleterious for β-cells is unknown. Furthermore, although it is clear that HNF1α is required for β-cell function, it is not known whether this role is cell autonomous or whether there is a restricted developmental time frame for HNF1α to elicit gene activation in β-cells. To address this, we generated a tetracycline-inducible mouse model that transcribes HNF1α selectively in β-cells in either wild-type or Hnf1α-null backgrounds. Short-term induction of HNF1α in islets from adult Hnf1α−/− mice that did not express HNF1α throughout development resulted in the activation of target genes, indicating that HNF1α has β-cell–autonomous functions that can be rescued postnatally. However, transgenic induction throughout development, which inevitably resulted in supraphysiological levels of HNF1α, strikingly caused a severe reduction of cellular proliferation, increased apoptosis, and consequently β-cell depletion and diabetes. Thus, HNF1α is sensitive to both reduced and excessive concentrations in β-cells. This finding illustrates the paramount importance of using the correct concentration of a β-cell transcription factor in both gene therapy and artificial differentiation strategies.