Diabetes is a disorder characterized by loss of β cell mass and/or β cell function, leading to deficiency of insulin relative to metabolic need. To determine whether stem cell–derived β cells recapitulate molecular-physiological phenotypes of a diabetic subject, we generated induced pluripotent stem cells (iPSCs) from subjects with maturity-onset diabetes of the young type 2 (MODY2), which is characterized by heterozygous loss of function of the gene encoding glucokinase (GCK). These stem cells differentiated into β cells with efficiency comparable to that of controls and expressed markers of mature β cells, including urocortin-3 and zinc transporter 8, upon transplantation into mice. While insulin secretion in response to arginine or other secretagogues was identical to that in cells from healthy controls, GCK mutant β cells required higher glucose levels to stimulate insulin secretion. Importantly, this glucose-specific phenotype was fully reverted upon gene sequence correction by homologous recombination. Our results demonstrate that iPSC-derived β cells reflect β cell–autonomous phenotypes of MODY2 subjects, providing a platform for mechanistic analysis of specific genotypes on β cell function.