In pancreatic beta-cells, the endoplasmic reticulum (ER) is an important cellular compartment for insulin biosynthesis, which accounts for half of the total protein production in these cells. Protein flux through the ER must be carefully monitored to prevent dysregulation of ER homeostasis and stress. ER stress elicits a signaling cascade known as the unfolded protein response (UPR), which influences both life and death decisions in cells. beta-cell loss is a pathological component of both type 1 and type 2 diabetes, and recent findings suggest that ER stress is involved. In this review, we address the transition from the physiological ER stress response to the pathological response, and explore the mechanisms of ER stress-mediated beta-cell loss during the progression of diabetes.