Genetic variants near ARAP1 (CENTD2) and STARD10 influence type 2 diabetes (T2D) risk. The risk alleles impair glucose-induced insulin secretion and, paradoxically but characteristically, are associated with decreased proinsulin:insulin ratios, indicating improved proinsulin conversion. Neither the identity of the causal variants nor the gene(s) through which risk is conferred have been firmly established. Whereas ARAP1 encodes a GTPase activating protein, STARD10 is a member of the steroidogenic acute regulatory protein (StAR)-related lipid transfer protein family. By integrating genetic fine-mapping and epigenomic annotation data and performing promoter-reporter and chromatin conformational capture (3C) studies in β cell lines, we localize the causal variant(s) at this locus to a 5 kb region that overlaps a stretch-enhancer active in islets. This region contains several highly correlated T2D-risk variants, including the rs140130268 indel. Expression QTL analysis of islet transcriptomes from three independent subject groups demonstrated that T2D-risk allele carriers displayed reduced levels of STARD10 mRNA, with no concomitant change in ARAP1 mRNA levels. Correspondingly, β-cell-selective deletion of StarD10 in mice led to impaired glucose-stimulated Ca2+ dynamics and insulin secretion and recapitulated the pattern of improved proinsulin processing observed at the human GWAS signal. Conversely, overexpression of StarD10 in the adult β cell improved glucose tolerance in high fat-fed animals. In contrast, manipulation of Arap1 in β cells had no impact on insulin secretion or proinsulin conversion in mice. This convergence of human and murine data provides compelling evidence that the T2D risk associated with variation at this locus is mediated through reduction in STARD10 expression in the β cell.