One of the hallmarks of type 2 diabetes is that pancreatic beta cells fail to release sufficient amounts of insulin in the presence of elevated blood glucose levels. Insulin secretion is modulated by many hormones and neurotransmitters including acetylcholine, the major neurotransmitter of the peripheral parasympathetic nervous system. The physiological role of muscarinic acetylcholine receptors expressed by pancreatic beta cells remains unclear at present. Here, we demonstrate that mutant mice selectively lacking the M3 muscarinic acetylcholine receptor subtype in pancreatic beta cells display impaired glucose tolerance and greatly reduced insulin release. In contrast, transgenic mice selectively overexpressing M3 receptors in pancreatic beta cells show a profound increase in glucose tolerance and insulin release. Moreover, these mutant mice are resistant to diet-induced glucose intolerance and hyperglycemia. These findings indicate that beta cell M3 muscarinic receptors play a key role in maintaining proper insulin release and glucose homeostasis.