Dedifferentiation has been implicated in β cell dysfunction and loss in rodent diabetes. However, the pathophysiological significance in humans remains unclear. To elucidate this, we analyzed surgically resected pancreatic tissues of 26 Japanese subjects with diabetes and 11 nondiabetic subjects, who had been overweight during adulthood but had no family history of diabetes. The diabetic subjects were subclassified into 3 disease stage categories, early, advanced, and intermediate. Despite no numerical changes in endocrine cells immunoreactive for chromogranin A (ChgA), diabetic islets showed profound β cell loss, with an increase in α cells without an increase in insulin and glucagon double-positive cells. The proportion of dedifferentiated cells that retain ChgA immunoreactivity without 4 major islet hormones was strikingly increased in diabetic islets and rose substantially during disease progression. The increased dedifferentiated cell ratio was inversely correlated with declining C-peptide index. Moreover, a subset of islet cells converted into exocrine-like cells during disease progression. These results indicate that islet remodeling with dedifferentiation is the underlying cause of β cell failure during the course of diabetes progression in humans.