The ATP-sensitive potassium (KATP) channel controls blood glucose levels by coupling glucose metabolism to insulin secretion in pancreatic beta cells. E23K, a common polymorphism in the pore-forming KATP channel subunit (KCNJ11) gene, has been linked to increased risk of type 2 diabetes. Understanding the risk-allele-specific pathogenesis has the potential to improve personalized diabetes treatment, but the underlying mechanism has remained elusive. Using a genetically engineered mouse model, we now show that the K23 variant impairs glucose-induced insulin secretion and increases diabetes risk when combined with a high fat diet (HFD) and obesity. KATP-channels in beta cells with two K23 risk alleles (KK) showed decreased ATP inhibition and the threshold for glucose-stimulated insulin secretion from KK islets was increased. Consequently, the insulin response to glucose and glycaemic control were impaired in KK mice on a standard diet. On a HFD, the effects of the KK genotype were exacerbated, accelerating diet-induced diabetes progression and causing beta cell failure. We conclude that the K23 variant increases diabetes risk by impairing insulin secretion at threshold glucose levels, thus accelerating loss of beta cell function in the early stages of diabetes progression.