It is well established that the IFN-gamma/STAT1 pathway plays an important role in the pancreatic beta-cell apoptosis that is observed in STZ-induced type 1 diabetes; however, the upstream regulatory proteins involved have not been understood. Here, we investigated whether activating transcription factor 3 (ATF3) affects STAT1-mediated beta-cell dysfunction and apoptosis in streptozotocin-treated mice. To this, STZ (80 mg/kg, i.p.) was administered to wild-type and STAT1(-/-) or IFN-gamma(-/-) mice for 5 days and the mice were euthanized after 14 days. STZ-induced beta-cell dysfunction and apoptosis were associated with increased STAT1/IRF-1 and ATF3 expression and were correlated with elevated IFN-gamma levels. Genetic depletion using IFN-gamma(-/-) or STAT1(-/-) mice strongly inhibited the reduction of islet cell mass or insulin synthesis/secretion and the increase of beta-cell apoptosis observed in STZ-treated wild-type mice. ATF3 overexpression, especially the C-terminal domain, strongly enhanced beta-cell dysfunction and apoptosis by enhancing STAT1 activation and its accumulation, which were abolished with an ATF3-specific siRNA or C-terminal-deleted ATF3. The STZ induction of ATF3 was completely depleted in IFN-gamma(-/-) mice, but not in STAT1(-/-) mice. Furthermore, STAT1 did not affect ATF3 expression, but STAT1 depletion or its inactivation inhibited STZ-induced ATF3 nuclear translocation and beta-cell apoptosis. Interestingly, ATF3 also increased STAT1 transcription by directly binding to a putative binding region (-116 to -96 bp) in the STAT1 promoter. Our results suggest that ATF3 functions as a potent upstream regulator of STAT1 and ATF3 may play a role in STZ-induced beta-cell dysfunction by enhancing the steady state abundance of STAT1.