Genome-wide association studies (GWAS) have identified more than 70 loci associated with type 2 diabetes (T2D), but for most, the underlying causal variants, associated genes, and functional mechanisms remain unknown. At a T2D- and fasting-proinsulin-associated locus on 11q13.4, we have identified a functional regulatory DNA variant, a candidate target gene, and plausible underlying molecular and biological mechanisms. We confirmed the existence of a single major association signal between fasting proinsulin and noncoding variants (p = 7.4 × 10-50). Measurement of allele-specific mRNA levels in human pancreatic islet samples heterozygous for rs11603334 showed that the T2D-risk increasing and proinsulin-decreasing allele (C) is associated with increased ARAP1 expression (p < 0.02). By performing transcriptional reporter assays in rodent pancreatic beta cell lines, we determined that the C allele of rs11603334, located at the ARAP1 P1 promoter, exhibits 2-fold higher transcriptional activity than T allele (p < 0.0001). Electrophoretic mobility shift assays demonstrated decreased binding of pancreatic beta cell transcriptional regulator PAX6 to the rs11603334 C allele. Collectively, these data suggest that the T2D-risk allele of rs11603334 could abrogate binding of a complex containing PAX6 and thus lead to increased P1 promoter activity and ARAP1 expression in human pancreatic islets. We went on to determine that the ARAP1 protein isoform corresponding to ARAP1 mRNA transcripts transcribed from P1 is a major isoform present in human islets, and that adenoviral overexpression of this ARAP1 isoform in intact human islets led to decreased levels of glucose-stimulated proinsulin secretion (p = 0.02). Using G-LISA GTPase activity assays, we also determined that, through the activity of its ARF-GAP domain, increased ARAP1 expression in human islets decreases the levels of ARF6-GTP (p = 0.02), a known regulator of glucose-stimulated insulin secretion in the beta cell. We also showed that ARAP1 and ARF6 partially colocalize in the cytoplasm of dispersed human beta cells. Altogether, this body of evidence demonstrates a connected set of molecular and biological mechanisms that may explain GWAS association of the ARAP1 locus with proinsulin and T2D.