Objective Certain ethnicities such as South Asians and East Asians have higher rates of type 2 diabetes mellitus, in part, driven by insulin deficiency. Insulin deficiency can be due to beta-cell insufficiency, low beta-cell mass, or early cell death. Transcription factor XBP1 maintains beta-cell function and prevents early cell death by mitigating cellular endoplasmic reticulum stress. We examine the role of XBP1 expression in maintaining glucose homeostasis, glycaemic control, and response to diabetes therapeutics. Research Design and Methods Colocalisation analyses were used to determine if expression of XBP1 in pancreatic islets and type 2 diabetes shared common causal genetic variants. We identify a lead eQTL variant associated exclusively with XBP1 expression and examine its association HOMA-B and stimulated glucose in cohorts of newly diagnosed Asian Indians from Dr. Mohans Diabetes Specialities Centre, India (DMDSC) and the Telemedicine Project for Screening diabetes and complications in rural Tamil Nadu (TREND). We then examine longer term glycaemic control using HbA1c in Asian Indian cohorts, the Tayside Diabetes Study (TDS) of white European ancestry in Scoltand, and the Genes & Health (G&H) study of British South Asian Bangladeshi and Pakistani ancestry. Finally, we assess the effect of eQTL variant on drugs designed to improve insulin secretion (sulphonylureas and GLP1-RA). Results Variants affecting XBP1 expression in the pancreatic islets colocalised with variants associated with T2DM risk in East Asians but not in white Europeans. Lower expression of XBP1 was associated with higher risk of T2DM. rs7287124 was the lead eQTL variant and had a higher risk allele frequency in East (65%) and South Asians (50%) compared to white Europeans (25%). In 470 South Asian Indians, the variant was associated with lower beta-cell function and higher stimulated glucose (Beta log HOMAB =-0.14, P=5x10-3). Trans-ancestry meta-analysed effect of the variant in 179,668 individuals was 4.32 mmol/mol (95%CI:2.60,6.04, P=8x10-7) per allele. In 477 individuals with young onset diabetes with non-obese BMI, the per allele effect was 6.41 mmol/mol (95%CI:3.04, 9.79, P =2x10-4). Variant carriers showed impaired response to sulphonylureas. Conclusion XBP1 expression is a novel target for T2DM with particular value for individuals of under-researched ancestries who have greater risk of young, non-obese onset diabetes. The effect of XBP1 eQTL variant was found to be comparable with or greater that the effect of novel glucose-lowering therapies.