Objective: The effectiveness of bariatric surgery in restoring β-cell function has been described in type-2 diabetes (T2D) patients and animal models for years, whereas the mechanistic underpinnings are largely unknown. The possibility of vertical sleeve gastrectomy (VSG) to rescue far-progressed, clinically-relevant T2D and to promote β-cell recovery has not been investigated on a single-cell level. Nevertheless, characterization of the heterogeneity and functional states of β-cells after VSG is a fundamental step to understand mechanisms of glycaemic recovery and to ultimately develop alternative, less-invasive therapies. Methods: We performed VSG in late-stage diabetic db/db mice and analyzed the islet transcriptome using single-cell RNA sequencing (scRNA-seq). Immunohistochemical analyses and quantification of β-cell area and proliferation complement our findings from scRNA-seq. Results: We report that VSG was superior to calorie restriction in late-stage T2D and rapidly restored normoglycaemia in morbidly obese and overt diabetic db/db mice. Single-cell profiling of islets of Langerhans showed that VSG induced distinct, intrinsic changes in the β-cell transcriptome, but not in that of α-, δ-, and PP-cells. VSG triggered fast β-cell redifferentiation and functional improvement within only two weeks of intervention, which is not seen upon calorie restriction. Furthermore, VSG expanded β-cell area by means of redifferentiation and by creating a proliferation competent β-cell state. Conclusion: Collectively, our study reveals the superiority of VSG in the remission of far-progressed T2D and presents paths of β-cell regeneration and molecular pathways underlying the glycaemic benefits of VSG.