Genome-wide association studies (GWASs) have identified many disease-associated variant alleles, but understanding whether and how different genes/loci interact requires a platform for probing how the variant alleles act mechanistically. Isogenic mutant human embryonic stem cells (hESCs) provide an unlimited resource to derive and study human disease-relevant cells. Here, we focused on CDKAL1, linked by GWASs to diabetes. Through transcript profiling, we find that expression of the metallothionein (MT) gene family, also linked by GWASs to diabetes, is significantly downregulated in CDKAL1 cells that have been differentiated to insulin-expressing pancreatic beta-like cells. Forced MT1E expression rescues both hypersensitivity of CDKAL1 mutant cells to glycolipotoxicity and pancreatic beta-cell dysfunction in vitro and in vivo. MT1E functions at least in part through relief of ER stress. This study establishes an isogenic hESC-based platform to study the interaction of GWAS-identified diabetes gene variants and illuminate the molecular network impacting disease progression.