Type 2 diabetes (T2D) is associated with defective insulin secretion and reduced β cell mass. Available treatments provide a temporary reprieve, but secondary failure rates are high, making insulin supplementation necessary. Reversibility of β cell failure is a key translational question. Here, we reverse engineered and interrogated pancreatic islet–specific regulatory networks to discover T2D-specific subpopulations characterized by metabolic inflexibility and endocrine progenitor/stem cell features. Single-cell gain- and loss-of-function and glucose-induced Ca²⁺ flux analyses of top candidate master regulatory (MR) proteins in islet cells validated transcription factor BACH2 and associated epigenetic effectors as key drivers of T2D cell states. BACH2 knockout in T2D islets reversed cellular features of the disease, restoring a nondiabetic phenotype. BACH2-immunoreactive islet cells increased approximately 4-fold in diabetic patients, confirming the algorithmic prediction of clinically relevant subpopulations. Treatment with a BACH inhibitor lowered glycemia and increased plasma insulin levels in diabetic mice, and restored insulin secretion in diabetic mice and human islets. The findings suggest that T2D-specific populations of failing β cells can be reversed and indicate pathways for pharmacological intervention, including via BACH2 inhibition.