Pancreatic β-cell loss through apoptosis is an important disease mechanism in type 2 diabetes. Apoptosis Repressor with CARD (ARC) is a cell death inhibitor that antagonizes multiple death programs. We previously reported that ARC is abundant in pancreatic β-cells and modulates survival of these cells in vitro. Herein we assessed the importance of endogenous ARC in maintaining islet structure and function in vivo. While generalized loss of ARC did not result in detectable abnormalities, its absence in ob/ob mice, a model of type 2 diabetes, induced a striking pancreatic phenotype: marked β-cell death, loss of β-cell mass, derangements of islet architecture, and impaired glucose-stimulated insulin secretion in vivo. These abnormalities contributed to worsening of hyperglycemia and glucose-intolerance in these mice. Mechanistically, the absence of ARC increased levels of C/EBP homologous protein (CHOP) in wild type isolated islets stimulated with ER stress and in ob/ob isolated islets at baseline. Deletion of CHOP in ob/ob; ARC -/- mice led to reversal of β-cell death and abnormalities in islet architecture. These data indicate that suppression of CHOP by endogenous levels of ARC is critical for β-cell viability and maintenance of normal islet structure in this model of type 2 diabetes.