Chronic exposure to elevated free fatty acids (lipotoxicity) induces uncoupling protein (UCP2) in the pancreatic beta-cell, and therefore a causal link between UCP2 and beta-cell defects associated with obesity may exist. Recently, we showed that lipid treatment in vivo and in vitro in UCP2(-/-) mice/islets does not result in any loss in beta-cell glucose sensitivity. We have now assessed the mechanism of maintained beta-cell function in UCP2(-/-) mice by exposing islets to 0.4 mM palmitate for 48 h. Palmitate treatment increased triglyceride concentrations in wild type (WT) but not UCP2(-/-) islets because of higher palmitate oxidation rates in the UCP2(-/-) islets. Dispersed beta-cells from the palmitate-exposed WT islets had reduced glucose-stimulated hyperpolarization of the mitochondrial membrane potential compared with both control WT and palmitate-exposed UCP2(-/-) beta-cells. The glucose-stimulated increases in the ATP/ADP ratio and cytosolic Ca2+ are attenuated in palmitate-treated WT but not UCP2(-/-) beta-cells. Exposure to palmitate reduced glucose-stimulated insulin secretion (GSIS) in WT islets, whereas UCP2(-/-) islets had enhanced GSIS. Overexpression of recombinant UCP2 but not enhanced green fluorescent protein in beta-cells resulted in a loss of glucose-stimulated hyperpolarization of the mitochondrial membrane potential and GSIS similar to that seen in WT islets exposed to palmitate. Reactive oxygen species (ROS) are known to increase the activity of UCP2. We showed that ROS levels were elevated in control UCP2(-/-) islets as compared with WT and UCP2(-/-) islets overexpressing UCP2 and that palmitate increased ROS in WT and UCP2(-/-) islets overexpressing UCP2 but not in UCP2(-/-) islets. Thus, UCP2(-/-) islets resisted the toxic effects of palmitate by maintaining glucose-dependent metabolism-secretion coupling. We propose that higher free fatty acid oxidation rates prevent accumulation of triglyceride in UCP2(-/-) islets, such accumulation being a phenomenon associated with lipotoxicity.