The growth and function of organs such as pancreatic islets adapt to meet physiological challenges and maintain metabolic balance, but the mechanisms controlling these facultative responses are unclear. Diabetes in patients treated with calcineurin inhibitors such as cyclosporin A indicates that calcineurin/nuclear factor of activated T-cells (NFAT) signalling might control adaptive islet responses, but the roles of this pathway in beta-cells in vivo are not understood. Here we show that mice with a beta-cell-specific deletion of the calcineurin phosphatase regulatory subunit, calcineurin b1 (Cnb1), develop age-dependent diabetes characterized by decreased beta-cell proliferation and mass, reduced pancreatic insulin content and hypoinsulinaemia. Moreover, beta-cells lacking Cnb1 have a reduced expression of established regulators of beta-cell proliferation. Conditional expression of active NFATc1 in Cnb1-deficient beta-cells rescues these defects and prevents diabetes. In normal adult beta-cells, conditional NFAT activation promotes the expression of cell-cycle regulators and increases beta-cell proliferation and mass, resulting in hyperinsulinaemia. Conditional NFAT activation also induces the expression of genes critical for beta-cell endocrine function, including all six genes mutated in hereditary forms of monogenic type 2 diabetes. Thus, calcineurin/NFAT signalling regulates multiple factors that control growth and hallmark beta-cell functions, revealing unique models for the pathogenesis and therapy of diabetes.