Plays an important role in the differentiation and development of pancreatic islet beta cells. Transcriptional repressor that binds to a common element in the glucagon, insulin and somatostatin promoters. Competes with PAX6 for this same promoter binding site. Isoform 2 appears to be a dominant negative form antagonizing PAX4 transcriptional activity.

Involvement in disease;  
 Defects in PAX4 are a cause of noninsulin-dependent diabetes mellitus (NIDDM) ; also known as diabetes mellitus type 2 or maturity-onset diabetes. NIDDM is characterized by an autosomal dominant mode of inheritance, onset during adulthood and insulin resistance.

Genetic variations in PAX4 are associated with susceptibility to insulin-dependent diabetes mellitus (IDDM). IDDM normally starts in childhood or adolescence and is caused by the body's own immune system which destroys the insulin-producing beta cells in the pancreas. Classical features are polydipsia, polyphagia and polyuria, due to hyperglycemia-induced osmotic diuresis.

Defects in PAX4 are a cause of susceptibility to diabetes mellitus ketosis-prone (KPD). KPD is an atypical form of diabetes mellitus characterized by an acute initial presentation with severe hyperglycemia and ketosis, as seen in classic type 1 diabetes, but after initiation of insulin therapy, prolonged remission is often possible with cessation of insulin therapy and maintenance of appropriate metabolic control. Metabolic studies show a markedly blunted insulin secretory response to glucose, partially reversible with the improvement of blood glucose control. Variable levels of insulin resistance are observed, especially in obese patients. Pancreatic beta-cell autoimmunity is a rare finding.