G protein-coupled receptor 40/free fatty acid receptor 1 (GPR40/FFA(1)) is highly expressed in pancreatic β cells and mediates free fatty acid-induced insulin secretion. This study examined the pharmacological effects and potential for avoidance of lipotoxicity of [(3S)-6-({2',6'-dimethyl-4'-[3-(methylsulfonyl)propoxy]biphenyl-3-yl}meth-oxy)-2,3-dihydro-1-benzofuran-3-yl]acetic acid hemi-hydrate) (TAK-875), a novel, orally available, selective GPR40 agonist. Insulinoma cell lines and primary rat islets were used to assess the effects of TAK-875 in vitro. The in vivo effects of TAK-875 on postprandial hyperglycemia, fasting hyperglycemia, and normoglycemia were examined in type 2 diabetic and normal rats. In rat insulinoma INS-1 833/15 cells, TAK-875 increased intracellular inositol monophosphate and calcium concentration, consistent with activation of the Gqα signaling pathway. The insulinotropic action of TAK-875 (10 μM) in INS-1 833/15 and primary rat islets was glucose-dependent. Prolonged exposure of cytokine-sensitive INS-1 832/13 to TAK-875 for 72 h at pharmacologically active concentrations did not alter glucose-stimulated insulin secretion, insulin content, or caspase 3/7 activity, whereas prolonged exposure to palmitic or oleic acid impaired β cell function and survival. In an oral glucose tolerance test in type 2 diabetic N-STZ-1.5 rats, TAK-875 (1-10 mg/kg p.o.) showed a clear improvement in glucose tolerance and augmented insulin secretion. In addition, TAK-875 (10 mg/kg, p.o.) significantly augmented plasma insulin levels and reduced fasting hyperglycemia in male Zucker diabetic fatty rats, whereas in fasted normal Sprague-Dawley rats, TAK-875 neither enhanced insulin secretion nor caused hypoglycemia even at 30 mg/kg. TAK-875 enhances glucose-dependent insulin secretion and improves both postprandial and fasting hyperglycemia with a low risk of hypoglycemia and no evidence of β cell toxicity.