β-Cell lipotoxicity is thought to play an important role in the development of type 2 diabetes. However, no study has examined its role in type 1 diabetes, which could be clinically relevant for slow-onset type 1 diabetes. Reports of enhanced cytokine toxicity in fat-laden islets are consistent with the hypothesis that lipid and cytokine toxicity may be synergistic. Thus, β-cell lipotoxicity could be enhanced in models of autoimmune diabetes. To determine this, we examined the effects of prolonged free fatty acids elevation on β-cell secretory function in the prediabetic diabetes-prone BioBreeding (dp-BB) rat, its diabetes-resistant BioBreeding (dr-BB) control, and normal Wistar-Furth (WF) rats. Rats received a 48-h iv infusion of saline or Intralipid plus heparin (IH) (to elevate free fatty acid levels ~2-fold) followed by hyperglycemic clamp or islet secretion studies ex vivo. IH significantly decreased β-cell function, assessed both by the disposition index (insulin secretion corrected for IH-induced insulin resistance) and in isolated islets, in dp-BB, but not in dr-BB or WF, rats, and the effect of IH was inhibited by the antioxidant N-acetylcysteine. Furthermore, IH significantly increased islet cytokine mRNA and plasma cytokine levels (monocyte chemoattractant protein-1 and IL-10) in dp-BB, but not in dr-BB or WF, rats. All dp-BB rats had mononuclear infiltration of islets, which was absent in dr-BB and WF rats. In conclusion, the presence of insulitis was permissive for IH-induced β-cell dysfunction in the BB rat, which suggests a link between β-cell lipotoxicity and islet inflammation.