Like all the cells of an organism, pancreatic β-cells originate from embryonic stem cells through a complex cellular process termed differentiation. Differentiation involves the coordinated and tightly controlled activation/repression of specific effectors and gene clusters in a time-dependent fashion thereby giving rise to particular morphological and functional cellular features. Interestingly, cellular differentiation is not a unidirectional process. Indeed, growing evidence suggests that under certain conditions, mature β-cells can lose, to various degrees, their differentiated phenotype and cellular identity and regress to a less differentiated or a precursor-like state. This concept is termed dedifferentiation and has been proposed, besides cell death, as a contributing factor to the loss of functional β-cell mass in diabetes. β-cell dedifferentiation involves: (1) the downregulation of β-cell-enriched genes, including key transcription factors, insulin, glucose metabolism genes, protein processing and secretory pathway genes; (2) the concomitant upregulation of genes suppressed or expressed at very low levels in normal β-cells, the β-cell forbidden genes; and (3) the likely upregulation of progenitor cell genes. These alterations lead to phenotypic reconfiguration of β-cells and ultimately defective insulin secretion. While the major role of glucotoxicity in β-cell dedifferentiation is well established, the precise mechanisms involved are still under investigation. This review highlights the identified molecular mechanisms implicated in β-cell dedifferentiation including oxidative stress, endoplasmic reticulum (ER) stress, inflammation and hypoxia. It discusses the role of Foxo1, Myc and inhibitor of differentiation proteins and underscores the emerging role of non-coding RNAs. Finally, it proposes a novel hypothesis of β-cell dedifferentiation as a potential adaptive mechanism to escape cell death under stress conditions.