Rapamycin is used frequently in both transplantation and oncology. Although historically thought to have little diabetogenic effect, there is growing evidence of β-cell toxicity. This Review draws evidence for rapamycin toxicity from clinical studies of islet and renal transplantation, and of rapamycin as an anticancer agent, as well as from experimental studies. Together, these studies provide evidence that rapamycin has significant detrimental effects on β-cell function and survival and peripheral insulin resistance. The mechanism of action of rapamycin is via inhibition of mammalian target of rapamycin (mTOR). This Review describes the complex mTOR signaling pathways, which control vital cellular functions including mRNA translation, cell proliferation, cell growth, differentiation, angiogenesis, and apoptosis, and examines molecular mechanisms for rapamycin toxicity in β-cells. These mechanisms include reductions in β-cell size, mass, proliferation and insulin secretion alongside increases in apoptosis, autophagy, and peripheral insulin resistance. These data bring into question the use of rapamycin as an immunosuppressant in islet transplantation and as a second-line agent in other transplant recipients developing new-onset diabetes after transplantation with calcineurin inhibitors. It also highlights the importance of close monitoring of blood glucose levels in patients taking rapamycin as an anticancer treatment, particularly those with preexisting glucose intolerance.