Type 2 diabetes mellitus is characterized by insulin resistance and failure of pancreatic β‐cells producing insulin. Mitochondrial dysfunction may play a role in both processes of diabetes. Autophagy maintains cellular homeostasis through degradation and recycling of organelles such as mitochondria. As dysfunctional mitochondria are the main organelles removed by autophagy, we studied the role of autophagy in diabetes using mice with β‐cell–specific deletion of the Atg7 gene. Atg7‐mutant mice showed reduction in β‐cell mass and pancreatic insulin content. Electron microscopy showed swollen mitochondria and other ultrastructural changes in autophagy‐deficient β‐cells. Insulin secretory function ex vivo was also impaired. As a result, Atg7‐mutant mice showed hypoinsulinemia and hyperglycemia. These results suggest that autophagy is necessary to maintain structure, mass, and function of β‐cells. Besides its effect on β‐cells, autophagy may affect insulin sensitivity because mitochondrial dysfunction has been implicated in insulin resistance and autophagy is involved in the maintenance of the organelles. Furthermore, since aging is associated with impaired glucose tolerance, decline of autophagic activity may be involved in age‐associated reduction of glucose tolerance.