Abstract Aims/hypothesis Pancreatic beta cell dedifferentiation, transdifferentiation into other islet cells and apoptosis have been implicated in beta cell failure in type 2 diabetes, although the mechanisms are poorly defined. The endoplasmic reticulum stress response factor X-box binding protein 1 (XBP1) is a major regulator of the unfolded protein response. XBP1 expression is reduced in islets of people with type 2 diabetes, but its role in adult differentiated beta cells is unclear. Here, we assessed the effects of Xbp1 deletion in adult beta cells and tested whether XBP1-mediated unfolded protein response makes a necessary contribution to beta cell compensation in insulin resistance states. Methods Mice with inducible beta cell-specific Xbp1 deletion were studied under normal (chow diet) or metabolic stress (high-fat diet or obesity) conditions. Glucose tolerance, insulin secretion, islet gene expression, alpha cell mass, beta cell mass and apoptosis were assessed. Lineage tracing was used to determine beta cell fate. Results Deletion of Xbp1 in adult mouse beta cells led to beta cell dedifferentiation, beta-to-alpha cell transdifferentiation and increased alpha cell mass. Cell lineage-specific analyses revealed that Xbp1 deletion deactivated beta cell identity genes (insulin, Pdx1, Nkx6.1, Beta2, Foxo1) and derepressed beta cell dedifferentiation (Aldh1a3) and alpha cell (glucagon, Arx, Irx2) genes. Xbp1 deletion in beta cells of obese ob/ob or high-fat diet-fed mice triggered diabetes and worsened glucose intolerance by disrupting insulin secretory capacity. Furthermore, Xbp1 deletion increased beta cell apoptosis under metabolic stress conditions by attenuating the antioxidant response. Conclusions/interpretation These findings indicate that XBP1 maintains beta cell identity, represses beta-to-alpha cell transdifferentiation and is required for beta cell compensation and prevention of diabetes in insulin resistance states. Graphical abstract