Protein tyrosine phosphatase N2 (Ptpn2) is a type 1 diabetes (T1D) candidate gene identified from human genome-wide association studies. PTPN2 is highly expressed in human and murine islets and becomes elevated upon inflammation and models of T1D, suggesting that PTPN2 may be important for beta cell survival in the context of T1D. To test whether PTPN2 contributed to beta cell dysfunction in an inflammatory environment, we generated a beta cell-specific deletion of Ptpn2 in mice (Ptpn2 βKO). While unstressed animals exhibit normal metabolic profiles, low and high dose streptozotocin (STZ) treated Ptpn2 βKO mice displayed hyperglycemia and accelerated death, respectively. Furthermore, cytokine treated Ptpn2 KO islets resulted in impaired glucose-stimulated insulin secretion, mitochondrial defects and reduced glucose-induced metabolic flux, suggesting beta cells lacking Ptpn2 are more susceptible to inflammatory stress associated with T1D due to maladaptive metabolic fitness. Consistent with the phenotype, proteomic analysis identified an important metabolic enzyme ATP-citrate lyase (ACLY) as a novel PTPN2 substrate.