Blunted first-phase insulin secretion and insulin deficiency are indicators of β cell dysfunction and diabetes manifestation. Therefore, insights into molecular mechanisms that regulate insulin homeostasis might provide entry sites to replenish insulin content and restore β cell function. Here, we identify the insulin inhibitory receptor (inceptor; encoded by the gene IIR/ELAPOR1) as an insulin-binding receptor that regulates insulin stores by lysosomal degradation. Using human induced pluripotent stem cell (SC)-derived islets, we show that IIR knockout (KO) results in enhanced SC β cell differentiation and survival. Strikingly, extended in vitro culture of IIR KO SC β cells leads to greatly increased insulin content and glucose-stimulated insulin secretion (GSIS). We find that inceptor localizes to clathrin-coated vesicles close to the plasma membrane and in the trans-Golgi network as well as in secretory granules, where it acts as a sorting receptor to direct proinsulin and insulin towards lysosomal degradation. Targeting inceptor using a monoclonal antibody increases proinsulin and insulin content and improves SC β cell GSIS. Altogether, our findings reveal the basic mechanisms of β cell insulin turnover and identify inceptor as an insulin degradation receptor.