Diabetes mellitus (DM), a metabolic disorder characterized by hyperglycemia, is caused by insufficient insulin production due to excessive loss of pancreatic β cells (type I diabetes) or impaired insulin signaling due to peripheral insulin resistance (type II diabetes). Pancreatic β cell is the only insulin-secreting cell type that has highly developed endoplasmic reticulum (ER) to cope with high demands of insulin synthesis and secretion. Therefore, ER homeostasis is crucial to the proper function of insulin signaling. Accumulating evidence suggests that deleterious ER stress and excessive intracellular lipids in nonadipose tissues, such as myocyte, cardiomyocyte, and hepatocyte, cause pancreatic β-cell dysfunction and peripheral insulin resistance, leading to type II diabetes. The excessive deposition of lipid droplets (LDs) in specialized cell types, such as adipocytes, hepatocytes, and macrophages, has been found as a hallmark in ER stress-associated metabolic diseases, including obesity, diabetes, fatty liver disease, and atherosclerosis. However, much work remains to be done in understanding the mechanism by which ER stress response regulates LD formation and the pathophysiologic role of ER stress-associated LD in metabolic disease. This paper briefly summarizes the recent advances in ER stress-associated LD formation and its involvement in type II diabetes.