Current research on metabolic disorders and diabetes relies on animal models because multi-organ diseases cannot be well studied with the standard in vitro assays. Here, we connect models of key metabolic organs, pancreas and liver, on a microfluidic chip to enable diabetes research in a human-based in vitro system. Aided by mechanistic mathematical modelling, we show that hyperglycemia and high cortisone induce glucose dysregulation in the pancreas-liver microphysiological system (MPS) mimicking a diabetic phenotype seen in patients with glucocorticoid-induced diabetes. In this diseased condition, pancreas-liver MPS displays beta-cell dysfunction, steatosis, elevated ketone-body secretion, increased glycogen storage, and upregulated gluconeogenic gene expression. In turn, a physiological culture condition maintains the glucose tolerance and beta cell function. This method was evaluated for reproducibility in two laboratories and was effective in multiple pancreatic islet donors. The model also provides a platform to identify new therapeutic proteins as demonstrated with a combined transcriptome and proteome analysis.