Genetic variation can modulate gene expression, and thereby phenotypic variation and susceptibility to complex diseases such as type 2 diabetes (T2D). Here we harnessed the potential of DNA and RNA sequencing in human pancreatic islets from 89 deceased donors to identify genes of potential importance in the pathogenesis of T2D. We present a catalog of genetic variants regulating gene expression (eQTL) and exon use (sQTL), including many long noncoding RNAs, which are enriched in known T2D-associated loci. Of 35 eQTL genes, whose expression differed between normoglycemic and hyperglycemic individuals, siRNA of tetraspanin 33 (TSPAN33), 5'-nucleotidase, ecto (NT5E), transmembrane emp24 protein transport domain containing 6 (TMED6), and p21 protein activated kinase 7 (PAK7) in INS1 cells resulted in reduced glucose-stimulated insulin secretion. In addition, we provide a genome-wide catalog of allelic expression imbalance, which is also enriched in known T2D-associated loci. Notably, allelic imbalance in paternally expressed gene 3 (PEG3) was associated with its promoter methylation and T2D status. Finally, RNA editing events were less common in islets than previously suggested in other tissues. Taken together, this study provides new insights into the complexity of gene regulation in human pancreatic islets and better understanding of how genetic variation can influence glucose metabolism.