Up to 6% of diabetes has a monogenic cause including mutations in the insulin gene, and patients are candidates for a gene therapy. Using a mouse model of permanent neonatal diabetes, we assessed the efficacy of an adeno-associated virus (AAV)-mediated gene therapy. We used AAVs with a rat insulin 1 promoter (Ins1) regulating a human insulin gene (INS; AAV Ins1-INS) or native mouse insulin 1 (Ins1; AAV Ins-Ins1) to deliver an insulin gene to β-cells of constitutive insulin null mice (Ins1-/-Ins2-/-) and adult inducible insulin-deficient mice [Ins1-/-Ins2f/f PdxCreER and Ins1-/-Ins2f/f mice administered AAV Ins1-Cre)]. Although AAV Ins1-INS could successfully infect and confer insulin expression to β-cells, insulin null β-cells had a prohormone processing defect. Secretion of abundant proinsulin transiently reversed diabetes. We reattempted therapy with AAV Ins1-Ins1, but Ins1-/-Ins2-/- β-cells still had a processing defect of both replaced Ins1 and pro-islet amyloid polypeptide (proIAPP). In adult inducible models, β-cells that lost insulin expression developed a processing defect that resulted in impaired proIAPP processing and elevated circulating proIAPP, and cells infected with AAV Ins1-Ins1 to rescue insulin expression secreted proinsulin. We assessed the subcellular localization of prohormone convertase 1/3 (PC1/3) and detected defective sorting of PC1/3 to glycogen-containing vacuoles and retention in the endoplasmic reticulum as a potential mechanism underlying defective processing. We provide evidence that persistent production of endogenous proinsulin within β-cells is necessary for β-cells to be able to properly store and process proinsulin.