Type 2 diabetes (T2D) is characterized by insulin resistance and beta-cell failure. Insulin resistance per se, however, does not provoke overt diabetes as long as compensatory beta-cell function is maintained. The increased demand for insulin stresses the beta-cell endoplasmic reticulum (ER) and secretory pathway, and ER stress is associated with beta-cell failure in T2D. The tail recognition complex (TRC) pathway, including Asna1/TRC40, is implicated in the maintenance of endomembrane trafficking and ER homeostasis. To gain insight into the role of Asna1/TRC40 in maintaining endomembrane homeostasis and beta-cell function, we inactivated Asnal in beta-cells of mice. We show that Asna1 beta(-/-) mice develop hypoinsulinemia, impaired insulin secretion, and glucose intolerance that rapidly progresses to overt diabetes. Loss of Asnal function leads to perturbed plasma membrane-to-trans Golgi network and Golgi-to-ER retrograde transport as well as to ER stress in beta-cells. Of note, pharmacological inhibition of retrograde transport in isolated islets and insulinoma cells mimicked the phenotype of Asna1(beta-/-) beta-cells and resulted in reduced insulin content and ER stress. These data support a model where Asnal ensures retrograde transport and, hence, ER and insulin homeostasis in beta-cells.