Diabetes ensues when there is a net decrease in functional β-cell mass. Efforts to increase β-cell mass are limited by a concurrent loss of mature function. The molecular mechanisms underlying the reciprocal regulation between β-cell proliferation and mature function are unclear. Here, we demonstrate that constitutive and inducible genetic deletion of Tead1 in mouse β-cells leads to diabetes. Tead1, the transcription factor downstream of the mammalian-hippo pathway, has a developmental stage-specific critical function in β-cells and is required for maintenance of mature β-cell functional competence by direct transcriptional regulation of a network of critical β-cell transcription factors, including, Pdx1, Nkx6.1 and MafA. Concurrently, Tead1 directly activates Cdkn2a transcription in adult β-cells to inhibit proliferation. Studies in human β-cells demonstrate that Tead1 plays a similar regulatory role. Taken together, our findings uncover the non-redundant role of Tead1 in modulating the balance between proliferative capacity and functional competence.