Type 2 diabetes is caused by impaired insulin secretion and/or insulin resistance. Loss of pancreatic β-cell mass detected in human diabetic patients has been considered to be a major cause of impaired insulin secretion. Additionally, apoptosis is found in pancreatic β-cells; β-cell mass loss is induced when cell death exceeds proliferation. Recently, however, β-cell dedifferentiation to pancreatic endocrine progenitor cells and β-cell transdifferentiation to α-cell was reported in human islets, which led to a new underlying molecular mechanism. Hyperglycemia inhibits nuclear translocation and expression of forkhead box-O1 (FoxO1) and induces the expression of neurogenin-3(Ngn3), which is required for the development and maintenance of pancreatic endocrine progenitor cells. This new hypothesis (Foxology) is attracting attention because it explains molecular mechanism(s) underlying β-cell plasticity. The lineage tracing technique revealed that the contribution of dedifferentiation is higher than that of β-cell apoptosis retaining to β-cell mass loss. In addition, islet cells transdifferentiate each other, such as transdifferentiation of pancreatic β-cell to α-cell and vice versa. Islet cells can exhibit plasticity, and they may have the ability to redifferentiate into any cell type. This review describes recent findings in the dedifferentiation and transdifferentiation of β-cells. We outline novel treatment(s) for diabetes targeting islet cell plasticity.