Type 2 diabetes mellitus (T2DM) is a progressive metabolic disease characterised by insulin resistance, loss of β-cell function over time and a reduction in the number of functional β-cells which leads to inadequate insulin production and increased blood glucose levels. The available antidiabetic drugs are effective at controlling glycaemic levels but have limited ability to prevent β-cell loss and disease progression. Thus, the preservation and regeneration of pancreatic β-cells has become a promising therapeutic approach to the long-term disease modification. This review summarizes pancreatic β-cell biology in terms of islet architecture, development of the β cell, insulin biosynthesis and mechanisms that govern and regulate β cell homeostasis. It also reviews the key mechanisms involved in β-cell dysfunction in T2DM including glucotoxicity, lipotoxicity, oxidative stress, endoplasmic reticulum stress, mitochondrial dysfunction, inflammation, dedifferentiation and apoptosis. Special attention is given to novel therapeutic approaches which aim to preserve and regenerate β-cell function such as incretins, β-cell proliferation and redifferentiation, stem cell and cellular reprogramming, gene editing and molecular therapeutics, and islet transplantation involving tissue engineering. Furthermore, recent limitations in the clinical translation of regenerative therapies are presented, and future perspectives of precision medicine and targeting of β-cells are discussed. Together, these developments offer novel possibilities to restore insulin production, maintain functional β-cell mass and enhance long-term clinical results, thus offering promising disease-modifying strategies for management of T2DM.