The phenomenon of lipid-induced pancreatic β-cell dysfunction ("lipotoxicity") has been very well documented in numerous in vitro experimental systems and has become widely accepted. In vivo demonstration of β-cell lipotoxicity, on the other hand, has not been consistently demonstrated, and there remains a lack of consensus regarding the in vivo effects of chronically elevated free fatty acids (FFA) on β-cell function. Much of the disagreement relates to how insulin secretion is quantified in vivo and in particular whether insulin secretion is assessed in relation to whole body insulin sensitivity, which is clearly reduced by elevated FFA. By correcting for changes in in vivo insulin sensitivity, we and others have shown that prolonged elevation of FFA impairs β-cell secretory function. Prediabetic animal models and humans with a positive family history of type 2 diabetes are more susceptible to this impairment, whereas those with severe impairment of β-cell function (such as individuals with type 2 diabetes) demonstrate no additional impairment of β-cell function when FFA are experimentally raised. Glucolipotoxicity (i.e., the combined β-cell toxicity of elevated glucose and FFA) has been amply demonstrated in vitro and in some animal studies but not in humans, perhaps because there are limitations in experimentally raising plasma glucose to sufficiently high levels for prolonged periods of time. We and others have shown that therapies directed toward diminishing oxidative stress and ER stress have the potential to reduce lipid-induced β-cell dysfunction in animals and humans. In conclusion, lipid-induced pancreatic β-cell dysfunction is likely to be one contributor to the complex array of genetic and metabolic insults that result in the relentless decline in pancreatic β-cell function in those destined to develop type 2 diabetes, and mechanisms involved in this lipotoxicity are promising therapeutic targets.