The peptide hormone urocortin3 (Ucn3) is abundantly expressed by mature beta cells, yet its physiological role is unknown. Here we demonstrate that Ucn3 is stored and co-released with insulin and potentiates glucose-stimulated somatostatin secretion via cognate receptors on delta cells. Further, we found that islets lacking endogenous Ucn3 have fewer delta cells, reduced somatostatin content, impaired somatostatin secretion, and exaggerated insulin release, and that these defects are rectified by treatment with synthetic Ucn3 in vitro. Our observations indicate that the paracrine actions of Ucn3 activate a negative feedback loop that promotes somatostatin release to ensure the timely reduction of insulin secretion upon normalization of plasma glucose. Moreover, Ucn3 is markedly depleted from beta cells in mouse and macaque models of diabetes and in human diabetic islets. This suggests that Ucn3 is a key contributor to stable glycemic control, whose reduction during diabetes aggravates glycemic volatility and contributes to the pathophysiology of this disease.