The interest in the role of ferrous iron in diabetes pathophysiology has been revived by recent evidence of iron as an important determinant of pancreatic islet inflammation and as a biomarker of diabetes risk and mortality. The iron metabolism in the β-cell is complex. Excess free iron is toxic, but at the same time, iron is required for normal β-cell function and thereby glucose homeostasis. In the pathogenesis of diabetes, iron generates reactive oxygen species (ROS) by participating in the Fenton chemistry, which can induce oxidative damage and apoptosis. The aim of this review is to present and discuss recent evidence, suggesting that iron is a key pathogenic factor in both type 1 and type 2 diabetes with a focus on inflammatory pathways. Pro-inflammatory cytokine-induced β-cell death is not fully understood, but may include iron-induced ROS formation resulting in dedifferentiation by activation of transcription factors, activation of the mitochondrial apoptotic machinery or of other cell death mechanisms. The pro-inflammatory cytokine IL-1β facilitates divalent metal transporter 1 (DMT1)-induced β-cell iron uptake and consequently ROS formation and apoptosis, and we propose that this mechanism provides the relay between inflammation and oxidative β-cell damage. Iron chelation may be a potential therapeutic approach to reduce disease severity and mortality among diabetes patients. However, the therapeutic effect and safety of iron reduction need to be tested in clinical trials before dietary interventions or the use of iron chelation therapy titrated to avoid anaemia.