We have previously reported that obesity-induced diabetes developed in high-fat diet (HFD)-fed BDF1 mice. This is caused by insufficient insulin response to an excess glucose load. In this study, we have shown that the enhanced expression of retinaldehyde dehydrogenase 3 (Raldh3) causes functional disorders of pancreatic islets in diabetic mouse models. In the pancreatic islets of HFD-induced diabetic BDF1 mice and spontaneously diabetic C57BL/KsJ(db/db) mice, gene expression analysis with oligonucleotide microarray revealed a significant increase in Raldh3 expression. Exposure to a culture medium containing a higher glucose concentration (25 mM) significantly increased Raldh3 expression in murine MIN6 and alphaTC1 clone 9 cells, which derived from the α and β-cells of pancreatic islets, respectively. Overexpression of Raldh3 reduced the insulin secretion in MIN6 cells, and surprisingly, increased the glucagon secretion in alphaTC1 clone 9 cells. Furthermore, the knockdown of Raldh3 expression with siRNA decreased the glucagon secretion in alphaTC1 clone 9 cells. Raldh3 catalyzes the conversion of 13-cis retinal to 13-cis retinoic acid and we revealed that 13-cis retinoic acid significantly reduces cell viability in MIN6 and alphaTC1 clone 9 cells, but not in cells of H4IIEC3, 3T3-L1, and COS-1 cell lines. These findings suggest that an increasing expression of Raldh3 deregulates the balanced mechanisms of insulin and glucagon secretion in the pancreatic islets and may induce β-cell dysfunction leading to the development of type 2 diabetes.