Progressive loss of pancreatic β-cell functional mass and anti-diabetic drug responsivity are classic findings in diabetes, frequently attributed to compensatory insulin hypersecretion and β-cell exhaustion. However, loss of β-cell mass and identity still occurs in mouse models of human K ATP -gain-of-function induced Neonatal Diabetes Mellitus (NDM), in the absence of insulin secretion. Here we studied the mechanisms underlying and temporal progression of glucotoxicity-induced loss of functional β-cell mass in NDM mice, and the effects of sodium-glucose transporter 2 inhibitors (SGLT2i) therapy. Upon tamoxifen induction of transgene expression, NDM mice developed severe diabetes followed by an unexpected loss of insulin content, decreased proinsulin processing and proinsulin accumulation at 2-weeks of diabetes. This was accompanied by a marked increase in β-cell oxidative and ER stress, without changes in islet cell identity. Strikingly, early treatment with the SGLT2 inhibitor dapagliflozin restored insulin content, decreased proinsulin:insulin ratio and reduced oxidative and ER stress. However, despite reduction of blood glucose, dapagliflozin therapy was ineffective in restoring β-cell function in NDM mice when tit was initiated at >40 days of diabetes, when loss of β-cell mass and identity had already occurred. These results have important clinical implications as they demonstrate that: i) hyperglycemia per se, and not insulin hypersecretion, drives β-cell failure in diabetes, ii) recovery of β-cell function by SGLT2 inhibitors is through reduction of oxidative and ER stress, iii) SGLT2 inhibitors revert/prevent β-cell failure when used in early stages of diabetes, but not when loss of β-cell mass/identity already occurred, iv) common execution pathways underlie loss and recovery of β-cell function in different forms of diabetes.