Estrogen receptors (ERs) protect pancreatic islet survival in mice through rapid extranuclear actions. ERα also enhances insulin synthesis in cultured islets. Whether ERα stimulates insulin synthesis in vivo and, if so, through which mechanism(s) remain largely unknown. To address these issues, we generated a pancreas-specific ERα knockout mouse (PERαKO^−/−) using the Cre-loxP strategy and used a combination of genetic and pharmacologic tools in cultured islets and β cells. Whereas 17β-estradiol (E2) treatment up-regulates pancreatic insulin gene and protein content in control ERαlox/lox mice, these E2 effects are abolished in PERαKO^−/− mice. We find that E2-activated ERα increases insulin synthesis by enhancing glucose stimulation of the insulin promoter activity. Using a knock-in mouse with a mutated ERα eliminating binding to the estrogen response elements (EREs), we show that E2 stimulation of insulin synthesis is independent of the ERE. We find that the extranuclear ERα interacts with the tyrosine kinase Src, which activates extracellular signal-regulated kinases_1/2, to increase nuclear localization and binding to the insulin promoter of the transcription factor NeuroD1. This study supports the importance of ERα in β cells as a regulator of insulin synthesis in vivo.