Increased basal and loss of glucose-stimulated insulin secretion (GSIS) are hallmarks of beta-cell dysfunction associated with type 2 diabetes. It has been proposed that elevated glucose promotes insulin secretory defects by activating sterol regulatory element binding protein (SREBP)-1c, lipogenic gene expression, and neutral lipid storage. Activation of liver X receptors (LXRs) also activates SREBP-1c and increases lipogenic gene expression and neutral lipid storage but increases basal and GSIS. This study was designed to characterize the changes in de novo fatty acid and triacylglyceride (TAG) synthesis in LXR-activated beta-cells and determine how these changes contribute to elevated basal and GSIS. Treatment of INS-1 beta-cells with LXR agonist T0901317 and elevated glucose led to markedly increased nuclear localization of SREBP-1, lipogenic gene expression, de novo synthesis of monounsaturated fatty acids and TAG, and basal and GSIS. LXR-activated cells had increased fatty acid oxidation and expression of genes involved in mitochondrial beta-oxidation, particularly carnitine palmitoyltransferase-1. Increased basal insulin release from LXR-activated cells coincided with rapid turnover of newly synthesized TAG and required acyl-coenzyme A synthesis and mitochondrial beta-oxidation. GSIS from LXR-activated INS-1 cells required influx of extracellular calcium and lipolysis, suggesting production of lipid-signaling molecules from TAG. Inhibition of diacylglyceride (DAG)-binding proteins, but not classic isoforms of protein kinase C, attenuated GSIS from LXR-activated INS-1 cells. In conclusion, LXR activation in beta-cells exposed to elevated glucose concentrations increases de novo TAG synthesis; subsequent lipolysis produces free fatty acids and DAG, which are oxidized to increase basal insulin release and activate DAG-binding proteins to enhance GSIS, respectively.