Mutations in the transcription factor hepatocyte nuclear factor-1 alpha (HNF-1 alpha) cause maturity-onset diabetes of the young 3, a severe form of diabetes characterized by pancreatic beta-cell dysfunction. We have used targeted expression of a dominant-negative mutant of HNF-1 alpha to specifically suppress HNF-1 alpha function in beta-cells of transgenic mice. We show that males expressing the mutant protein became overtly diabetic within 6 wk of age, whereas females displayed glucose intolerance. Transgenic males exhibited impaired glucose-stimulated insulin secretion, detected both in vivo and in the perfused pancreas. Pancreatic insulin content was markedly decreased in diabetic animals, whereas the glucagon content was increased. Postnatal islet development was altered, with an increased alpha-cell to beta-cell ratio. beta-Cell ultrastructure showed signs of severe beta-cell damage, including mitochondrial swelling. This animal model of maturity-onset diabetes of the young 3 should be useful for the further elucidation of the mechanism by which HNF-1 alpha deficiency causes beta-cell dysfunction in this disease.