Amyloidosis is a common pathological event in which proteins self-assemble into misfolded soluble and insoluble molecular forms, oligomers and fibrils that are often toxic to cells. Notably, aggregation-prone human islet amyloid polypeptide (hIAPP), or amylin, is a pancreatic hormone linked to islet β-cells demise in diabetics. The unifying mechanism by which amyloid proteins, including hIAPP, aggregate and kill cells is still matter of debate. The pathology of type-2 diabetes mellitus (T2DM) is characterized by extracellular and intracellular accumulation of toxic hIAPP species, soluble oligomers and insoluble fibrils in pancreatic human islets, eventually leading to loss of β-cell mass. This review focuses on molecular, biochemical and cell-biology studies exploring molecular mechanisms of hIAPP synthesis, trafficking and degradation in the pancreas. In addition to hIAPP turnover, the dynamics and the mechanisms of IAPP–membrane interactions; hIAPP aggregation and toxicity in vitro and in situ; and the regulatory role of diabetic factors, such as lipids and cholesterol, in these processes are also discussed.