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Immediate early response 3 interacting-protein 1 (IER3IP1) is an endoplasmic reticulum resident protein, highly expressed in pancreatic cells and the developing brain cortex. Homozygous mutations in IER3IP1 have been found in individuals with microcephaly and neonatal diabetes, yet the underlying mechanism causing beta cell failure remains unclear. Here, we utilized differentiation of genome edited-stem cells into pancreatic islet cells to elucidate the molecular basis of IER3IP1 neonatal diabetes. Using CRISPR-Cas9, we generated two distinct IER3IP1-mutant human embryonic stem cell lines: a homozygous knock-in model of a patient mutation (IER3IP1V21G), and a knockout model (IER3IP1-/-). While these mutant stem cell lines differentiated normally into definitive endoderm and pancreatic progenitors, we observed that IER3IP1-KO stem cell derived-islets (SC-islets) presented a significant decrease in beta cell numbers and elevated ER stress. Retention Using Selective Hooks (RUSH) assay revealed three-fold reduction in ER-to-Golgi trafficking of proinsulin in IER3IP1 mutant beta cells. Additionally, IER3IP1 mutant SC-islets implanted into immunocompromised mice displayed defective human insulin secretion, indicating the deleterious impact of IER3IP1 mutations on beta cell function. Our study provides valuable insights into the role of IER3IP1 in human beta cell biology and establishes a useful model to investigate ER-to-Golgi trafficking defects within beta cells., (© 2024 by the American Diabetes Association.)