Active maintenance of β-cell identity through fine-tuned regulation of key transcription factors ensures β-cell function. Tacrolimus, a widely used immunosuppressant, accelerates onset of diabetes after organ transplantation but underlying molecular mechanisms are unclear. Here we show that tacrolimus induces loss of human β-cell maturity and β-cell failure through activation of the BMP/SMAD signaling pathway when administered under mild metabolic stress conditions. Tacrolimus-induced phospho-SMAD1/5 acts in synergy with metabolic stress-activated FOXO1 through formation of a complex. This interaction is associated with reduced expression of the key β-cell transcription factor MAFA and abolished insulin secretion, both in vitro in primary human islets, and in vivo in human islets transplanted into high-fat diet fed mice. Pharmacological inhibition of BMP signaling protects human β-cells from tacrolimus-induced β-cell dysfunction in vitro Furthermore, we confirm that BMP/SMAD signaling is activated in protocol pancreas allograft biopsies from recipients on tacrolimus. To conclude, we propose a novel mechanism underlying the diabetogenicity of tacrolimus in primary human β-cells. This insight could lead to new treatment strategies for new-onset diabetes, and may have implications for other forms of diabetes.