Recent human genetics studies have revealed that common variants of the TCF7L2 (T-cell factor 7-like 2, formerly known as TCF4) gene are strongly associated with type 2 diabetes mellitus (T2DM). We have shown that TCF7L2 expression in the beta-cells is correlated with function and survival of the insulin-producing pancreatic beta-cell. In order to understand how variations in TCF7L2 influence diabetes progression, we investigated its mechanism of action in the beta-cell. We show robust differences in TCF7L2 expression between healthy controls and models of T2DM. While mRNA levels were approximately 2-fold increased in isolated islets from the diabetic db/db mouse, the Vancouver Diabetic Fatty (VDF) Zucker rat and the high fat/high sucrose diet-treated mouse compared with the non-diabetic controls, protein levels were decreased. A similar decrease was observed in pancreatic sections from patients with T2DM. In parallel, expression of the receptors for glucagon-like peptide 1 (GLP-1R) and glucose-dependent insulinotropic polypeptide (GIP-R) was decreased in islets from humans with T2DM as well as in isolated human islets treated with siRNA to TCF7L2 (siTCF7L2). Also, insulin secretion stimulated by glucose, GLP-1 and GIP, but not KCl or cyclic adenosine monophosphate (cAMP) was impaired in siTCF7L2-treated isolated human islets. Loss of TCF7L2 resulted in decreased GLP-1 and GIP-stimulated AKT phosphorylation, and AKT-mediated Foxo-1 phosphorylation and nuclear exclusion. Our findings suggest that beta-cell function and survival are regulated through an interplay between TCF7L2 and GLP-1R/GIP-R expression and signaling in T2DM.