Diabetes is a metabolic disease characterized by hyperglycemia. Over 90% of patients with diabetes have type 2 diabetes. Pancreatic β-cells are endocrine cells that produce and secrete insulin, an essential endocrine hormone that regulates blood glucose levels. Deficits in β-cell function and mass play key roles in the onset and progression of type 2 diabetes. Apoptosis has been considered as the main contributor of β-cell dysfunction and decrease in β-cell mass for a long time. However, recent studies suggest that β-cell failure occurs mainly due to increased β-cell dedifferentiation rather than limited β-cell proliferation or increased β-cell death. In this review, we summarize the current advances in the understanding of the pancreatic β-cell dedifferentiation process including potential mechanisms. A better understanding of β-cell dedifferentiation process will help to identify novel therapeutic targets to prevent and/or reverse β-cell loss in type 2 diabetes.