Type 2 diabetes is characterized by both insulin resistance and progressive deterioration of β-cell function. The forkhead transcription factor FoxO1 is a prominent mediator of insulin signaling in β-cells. We reasoned that identification of FoxO1 target genes in β-cells could reveal mechanisms linking β-cell dysfunction to insulin resistance. In this study, we report the characterization of Nov/Ccn3 as a novel transcriptional target of FoxO1 in pancreatic β-cells. FoxO1 binds to an evolutionarily conserved response element in the Ccn3 promoter to regulate its expression. Accordingly, CCN3 levels are elevated in pancreatic islets of mice with overexpression of a constitutively active form of FoxO1 or insulin resistance. Our functional studies reveal that CCN3 impairs β-cell proliferation concomitantly with a reduction in cAMP levels. Moreover, CCN3 decreases glucose oxidation, which translates into inhibition of glucose-stimulated Ca(2+) entry and insulin secretion. Our results identify CCN3, a novel transcriptional target of FoxO1 in pancreatic β-cells, as a potential target for therapeutic intervention in the treatment of diabetes.