Wolfram syndrome is an autosomal recessive disorder caused by mutations in WFS1 and is characterized by insulin-dependent diabetes mellitus, optic atrophy, and deafness. To investigate the cause of β-Cell failure, we used induced pluripotent stem cells to create insulin-producing cells from individuals with Wolfram syndrome. WFS1-deficient β-Cells showed increased levels of endoplasmic reticulum (ER) stress molecules and decreased insulin content. Upon exposure to experimental ER stress, Wolfram β-Cells showed impaired insulin processing and failed to increase insulin secretion in response to glucose and other secretagogues. Importantly, 4-phenyl butyric acid, a chemical protein folding and trafficking chaperone, restored normal insulin synthesis and the ability to upregulate insulin secretion. These studies show that ER stress plays a central role in β-Cell failure in Wolfram syndrome and indicate that chemical chaperones might have therapeutic relevance under conditions of ER stress in Wolfram syndrome and other forms of diabetes.