OBJECTIVE The ATP-binding cassette transporter A1 (ABCA1) is essential for normal insulin secretion from β-cells. The aim of this study was to elucidate the mechanisms underlying the impaired insulin secretion in islets lacking β-cell ABCA1. RESEARCH DESIGN AND METHODS Calcium imaging, patch clamp, and membrane capacitance were used to assess the effect of ABCA1 deficiency on calcium flux, ion channel function, and exocytosis in islet cells. Electron microscopy was used to analyze β-cell ultrastructure. The quantity and distribution of proteins involved in insulin-granule exocytosis were also investigated. RESULTS We show that a lack of β-cell ABCA1 results in impaired depolarization-induced exocytotic fusion of insulin granules. We observed disturbances in membrane microdomain organization and Golgi and insulin granule morphology in β-cells as well as elevated fasting plasma proinsulin levels in mice in the absence of β-cell ABCA1. Acute cholesterol depletion rescued the exocytotic defect in β-cells lacking ABCA1, indicating that elevated islet cholesterol accumulation directly impairs granule fusion and insulin secretion. CONCLUSIONS Our data highlight a crucial role of ABCA1 and cellular cholesterol in β-cells that is necessary for regulated insulin granule fusion events. These data suggest that abnormalities of cholesterol metabolism may contribute to the impaired β-cell function in diabetes.