The pancreatic islets of Langerhans are multicellular micro-organs integral to maintaining glucose homeostasis through secretion of the hormone insulin. β-cells within the islet exist as a highly coupled electrical network which coordinates electrical activity and insulin release at high glucose, but leads to global suppression at basal glucose. Despite its importance, how network dynamics generate this emergent binary on/off behavior remains to be elucidated. Previous work has suggested that a small threshold of quiescent cells is able to suppress the entire network. By modeling the islet as a Boolean network, we predicted a phase-transition between globally active and inactive states would emerge near this threshold number of cells, indicative of critical behavior. This was tested using islets with an inducible-expression mutation which renders defined numbers of cells electrically inactive, together with pharmacological modulation of electrical activity. This was combined with real-time imaging of intracellular free-calcium activity [Ca2+]i and measurement of physiological parameters in mice. As the number of inexcitable cells was increased beyond ∼15%, a phase-transition in islet activity occurred, switching from globally active wild-type behavior to global quiescence. This phase-transition was also seen in insulin secretion and blood glucose, indicating physiological impact. This behavior was reproduced in a multicellular dynamical model suggesting critical behavior in the islet may obey general properties of coupled heterogeneous networks. This study represents the first detailed explanation for how the islet facilitates inhibitory activity in spite of a heterogeneous cell population, as well as the role this plays in diabetes and its reversal. We further explain how islets utilize this critical behavior to leverage cellular heterogeneity and coordinate a robust insulin response with high dynamic range. These findings also give new insight into emergent multicellular dynamics in general which are applicable to many coupled physiological systems, specifically where inhibitory dynamics result from coupled networks.