Aims/hypothesis Homeodomain transcription factors play an important role in the regulation of pancreatic islet function. In previous studies we determined that aristaless-like homeobox 3 (ALX3) is produced in islet cells, binds to the promoter of the insulin gene and regulates its expression. The purpose of the present study was to investigate the functional role of ALX3 in pancreatic islets and its possible involvement in the regulation of glucose homeostasis in vivo. Methods Alx3-knockout mice were used. Glucose and insulin tolerance tests were carried out, and serum insulin concentrations were determined. Isolated islets were used to test insulin secretion and gene expression. The pancreatic islets were also studied using both confocal and conventional microscopy. Results ALX3 deficiency resulted in increased blood glucose levels and impaired glucose tolerance in the presence of normal serum insulin concentrations. Insulin, glucagon and glucokinase expression were reduced in Alx3-null pancreatic islets. Reduced insulin content was reflected by decreased insulin secretion from isolated islets. Alx3-deficient islets also showed increased apoptosis, and morphometric analyses indicated that they were, on average, of smaller size than islets from control mice. ALX3 deficiency resulted in reduced beta cell mass. Finally, mature Alx3-null mice developed age-dependent insulin resistance due to impaired peripheral insulin receptor signalling. Conclusions/interpretation ALX3 participates in the regulation of the expression of essential genes for the function of pancreatic islets, and its deficiency alters the regulation of glucose homeostasis in vivo. We suggest that ALX3 constitutes a potential candidate to consider in the aetiopathogenesis of diabetes mellitus.