Type 2 diabetes (T2D) results from insulin resistance and inadequate insulin secretion. Insulin resistance initially causes compensatory islet hyperplasia that progresses to islet disorganization and altered vascularization, inflammation, and, finally, decreased functional β-cell mass and hyperglycemia. The precise mechanism(s) underlying β-cell failure remain to be elucidated. In this study, we show that in insulin-resistant high-fat diet-fed mice, the enhanced islet vascularization and inflammation was parallel to an increased expression of vascular endothelial growth factor A (VEGF). To elucidate the role of VEGF in these processes, we have genetically engineered β-cells to overexpress VEGF (in transgenic mice or after adeno-associated viral vector-mediated gene transfer). We found that sustained increases in β-cell VEGF levels led to disorganized, hypervascularized, and fibrotic islets, progressive macrophage infiltration, and proinflammatory cytokine production, including tumor necrosis factor-α and interleukin-1β. This resulted in impaired insulin secretion, decreased β-cell mass, and hyperglycemia with age. These results indicate that sustained VEGF upregulation may participate in the initiation of a process leading to β-cell failure and further suggest that compensatory islet hyperplasia and hypervascularization may contribute to progressive inflammation and β-cell mass loss during T2D.