Despite the central role of chromosomal context in gene transcription, human noncoding DNA variants are generally studied outside of their endogenous genomic location. This poses major limitations to understand the true consequences of causal regulatory variants. We focused on a cis-regulatory mutation (c.-331C>G) in the INS gene promoter that is recurrently mutated in unrelated patients with recessive neonatal diabetes. We created mice in which a ~3.1 kb human INS upstream region carrying -331C or -331G alleles replaced the orthologous mouse Ins2 region. This human sequence drove cell-specific transcription in mice. It also recapitulated poised chromatin during pancreas development and active chromatin in differentiated bcells. The c.-331C>G mutation, however, blocked active chromatin formation in differentiated b-cells. We further show that another neonatal diabetes gene product, GLIS3, had a singular pioneer-like ability to activate INS chromatin in non-pancreatic cells, which was hampered by the c.-331C>G mutation. This in vivo analysis of human regulatory defects, therefore, uncovered cis and trans components of a mechanism that is essential to activate the endogenous INS gene.