A rare loss-of-function allele p.Arg138* in SLC30A8 encoding the zinc transporter 8 (ZnT8), which is enriched in Western Finland, protects against type 2 diabetes (T2D). We recruited relatives of the identified carriers and showed that protection was associated with better insulin secretion due to enhanced glucose responsiveness and proinsulin conversion, particularly when compared with individuals matched for the genotype of a common T2D-risk allele in SLC30A8, p.Arg325. In genome-edited human induced pluripotent stem cell (iPSC)-derived β-like cells, we establish that the p.Arg138* allele results in reduced SLC30A8 expression due to haploinsufficiency. In human β cells, loss of SLC30A8 leads to increased glucose responsiveness and reduced KATP channel function similar to isolated islets from carriers of the T2D-protective allele p.Trp325. These data position ZnT8 as an appealing target for treatment aimed at maintaining insulin secretion capacity in T2D.