Restoration of regulated insulin secretion is the ultimate goal of therapy for type 1 diabetes. Here, we show that, unexpectedly, somatic ablation of Foxo1 in Neurog3(+) enteroendocrine progenitor cells gives rise to gut insulin-positive (Ins(+)) cells that express markers of mature β cells and secrete bioactive insulin as well as C-peptide in response to glucose and sulfonylureas. Lineage tracing experiments showed that gut Ins(+) cells arise cell autonomously from Foxo1-deficient cells. Inducible Foxo1 ablation in adult mice also resulted in the generation of gut Ins(+) cells. Following ablation by the β-cell toxin streptozotocin, gut Ins(+) cells regenerate and produce insulin, reversing hyperglycemia in mice. The data indicate that Neurog3(+) enteroendocrine progenitors require active Foxo1 to prevent differentiation into Ins(+) cells. Foxo1 ablation in gut epithelium may provide an approach to restore insulin production in type 1 diabetes.