Background <p>Type 2 diabetes is characterized by progressive β cell dysfunction, yet the mechanisms by which genetic susceptibility contributes to β cell area and function remain poorly understood. PAX4 is a transcription factor critical for β cell development, and a nonsynonymous variant resulting in an arginine-to-histidine substitution at position 192 (R192H) has been associated with increased type 2 diabetes risk and identified only in individuals of East Asian ancestry.</p> Methods <p>Here, we generated <i>PAX4</i> R192H knock-in (<i>Pax4</i>^R192H/R192H) mouse and integrated metabolic phenotyping, bulk and single cell transcriptomics, and human cohort analyses to investigate how <i>PAX4</i> R192H mutation increases the risk of type 2 diabetes.</p> Results <p>Homozygote knock-in mice (<i>Pax4</i> R192H) exhibited normal pancreatic endocrine development but developed glucose intolerance and impaired insulin secretion when fed a high-fat diet. Bulk and single-cell RNA-seq of islets from <i>Pax4</i> R192H mice fed high-fat diet revealed impaired β cell adaptation to metabolic stress characterized by enhanced endoplasmic reticulum stress and impaired β cell maturity, with upregulation of dedifferentiation and α cell markers and downregulation of β cell identity genes. <i>Pax4</i> deletion in β cells resulted in similar phenotypic and transcriptomic profiles to <i>Pax4</i> R192H mice. In humans, the trajectories of β cell function were evaluated over a 14-year period using biennial oral glucose tolerance tests from 4,242 participants, where <i>PAX4</i> R192H carriers showed 1.4-fold accelerated decline in disposition index, with increasing body mass index further exacerbating their type 2 diabetes risk.</p> Conclusions <p>Overall, PAX4 is essential for maintaining β cell identity and compensatory function under metabolic stress, and the R192H variant predisposes to type 2 diabetes by impairing this adaptive capacity.</p>