In Wolfram syndrome, a rare form of juvenile diabetes, pancreatic beta-cell death is not accompanied by an autoimmune response. Although it has been reported that mutations in the WFS1 gene are responsible for the development of this syndrome, the precise molecular mechanisms underlying beta-cell death caused by the WFS1 mutations remain unknown. Here we report that WFS1 is a novel component of the unfolded protein response and has an important function in maintaining homeostasis of the endoplasmic reticulum (ER) in pancreatic beta-cells. WFS1 encodes a transmembrane glyco-protein in the ER. WFS1 mRNA and protein are induced by ER stress. The expression of WFS1 is regulated by inositol requiring 1 and PKR-like ER kinase, central regulators of the unfolded protein response. WFS1 is normally up-regulated during insulin secretion, whereas inactivation of WFS1 in beta-cells causes ER stress and beta-cell dysfunction. These results indicate that the pathogenesis of Wolfram syndrome involves chronic ER stress in pancreatic beta-cells caused by the loss of function of WFS1.