Mutations in several genes cause nonautoimmune diabetes, but numerous patients still have unclear genetic defects, hampering our understanding of the development of the disease and preventing pathogenesis-oriented treatment. We used whole-genome sequencing with linkage analysis to study a consanguineous family with early-onset antibody-negative diabetes and identified a novel deletion in PCBD1 (pterin-4 α-carbinolamine dehydratase/dimerization cofactor of hepatocyte nuclear factor 1 α), a gene that was recently proposed as a likely cause of diabetes. A subsequent reevaluation of patients with mild neonatal hyperphenylalaninemia due to mutations in PCBD1 from the BIODEF database identified three additional patients who had developed HNF1A-like diabetes in puberty, indicating early β-cell failure. We found that Pcbd1 is expressed in the developing pancreas of both mouse and Xenopus embryos from early specification onward showing colocalization with insulin. Importantly, a morpholino-mediated knockdown in Xenopus revealed that pcbd1 activity is required for the proper establishment of early pancreatic fate within the endoderm. We provide the first genetic evidence that PCBD1 mutations can cause early-onset nonautoimmune diabetes with features similar to dominantly inherited HNF1A-diabetes. This condition responds to and can be treated with oral drugs instead of insulin, which is important clinical information for these patients. Finally, patients at risk can be detected through a newborn screening for phenylketonuria.