Updated project metadata. Insufficient insulin secretion is a hallmark of type 2 diabetes and has been attributed to beta cell identity loss characterized by a decreased expression of several key beta cell genes. The pro-inflammatory factor BMP-2 is upregulated in islets of Langerhans from diabetic individuals and acts as an inhibitor of beta cell function and proliferation. Exposure to BMP-2 induces expression of Id1-4, Hes-1 and Hey-1, transcriptional regulators associated with loss of differentiation. The aim of this study was to investigate the mechanism of BMP-2 induced beta cell dysfunction and identity loss. Mouse islets exposed to BMP-2 for 10 days showed impaired insulin secretion and beta cell proliferation. BMP-2-induced beta cell dysfunction was associated with decreased expression of beta cell specific identity and proliferation markers such as Ins1, Ucn3 and Ki67 but increased expression of Id1-4, Hes-1 and Hey-1. BMP-2 regulated mRNA expression significantly correlated with corresponding protein expression. BMP-2 induced gene expression changes were associated with a predominant reduction in the H3K27ac mark and a decrease in NeuroD1 chromatin binding activity. These results show that BMP-2-induced beta cell dysfunction is associated with epigenetic changes, predominantly a reduction in H3K27ac and a decrease in NeuroD1 DNA binding resulting in altered beta cell gene expression.