Accumulating evidence suggests that endoplasmic reticulum (ER) stress plays a role in the pathogenesis of diabetes, contributing to pancreatic beta-cell loss and insulin resistance. Components of the unfolded protein response (UPR) play a dual role in beta-cells, acting as beneficial regulators under physiological conditions or as triggers of beta-cell dysfunction and apoptosis under situations of chronic stress. Novel findings suggest that "what makes a beta-cell a beta-cell", i.e., its enormous capacity to synthesize and secrete insulin, is also its Achilles heel, rendering it vulnerable to chronic high glucose and fatty acid exposure, agents that contribute to beta-cell failure in type 2 diabetes. In this review, we address the transition from physiology to pathology, namely how and why the physiological UPR evolves to a proapoptotic ER stress response and which defenses are triggered by beta-cells against these challenges. ER stress may also link obesity and insulin resistance in type 2 diabetes. High fat feeding and obesity induce ER stress in liver, which suppresses insulin signaling via c-Jun N-terminal kinase activation. In vitro data suggest that ER stress may also contribute to cytokine-induced beta-cell death. Thus, the cytokines IL-1beta and interferon-gamma, putative mediators of beta-cell loss in type 1 diabetes, induce severe ER stress through, respectively, NO-mediated depletion of ER calcium and inhibition of ER chaperones, thus hampering beta-cell defenses and amplifying the proapoptotic pathways. A better understanding of the pathways regulating ER stress in beta-cells may be instrumental for the design of novel therapies to prevent beta-cell loss in diabetes.