FURIN is a proprotein convertase (PC) responsible for proteolytic activation of a wide array of precursor proteins within the secretory pathway. It maps to the PRC1 locus, a type 2 diabetes susceptibility locus, yet its specific role in pancreatic β cells is largely unknown. The aim of this study was to determine the role of FURIN in glucose homeostasis. We show that FURIN is highly expressed in human islets, while PCs that potentially could provide redundancy are expressed at considerably lower levels. β cell-specific Furin knockout (βFurKO) mice are glucose intolerant, due to smaller islets with lower insulin content and abnormal dense core secretory granule morphology. mRNA expression analysis and differential proteomics on βFurKO islets revealed activation of Activating Transcription Factor 4 (ATF4), which was mediated by mammalian target of rapamycin C1 (mTORC1). βFurKO cells show impaired cleavage or shedding of the V-ATPase subunits Ac45 and prorenin receptor (PRR), respectively, and impaired lysosomal acidification. Blocking the V-ATPase pharmacologically in β cells increases mTORC1 activity, suggesting the involvement of the V-ATPase proton pump in the phenotype. Taken together, these results suggest a model of mTORC1-ATF4 hyperactivation and impaired lysosomal acidification in β cells lacking Furin, which causes β cell dysfunction.