Insulin granule biogenesis involves transport to, and stable docking at, the plasma membrane before priming and fusion. Defects in this pathway result in impaired insulin secretion and are a hallmark of type 2 diabetes. We now show that the phosphatidylinositol 4-phosphate phosphatase Sac2 localizes to insulin granules in a substrate-dependent manner and that loss of Sac2 results in impaired insulin secretion. Sac2 operates upstream of granule docking, since loss of Sac2 prevented granule tethering to the plasma membrane and resulted in both reduced granule density and number of exocytic events. Sac2 levels correlated positively with the number of docked granules and exocytic events in clonal β cells and with insulin secretion in human pancreatic islets, and Sac2 expression was reduced in islets from type 2 diabetic subjects. Taken together, we identified a phosphoinositide switch on the surface on insulin granules that is required for stable granule docking at the plasma membrane and impaired in human type 2 diabetes.