Elevation of the dietary saturated fatty acid palmitate contributes to the reduction of functional beta cell mass in the pathogenesis of type 2 diabetes. The diabetogenic effect of palmitate is achieved by increasing beta cell death through induction of the endoplasmic reticulum (ER) stress markers including activating transcription factor 3 (Atf3) and CAAT/enhancer-binding protein homologous protein-10 (Chop). In this study, we investigated whether treatment of beta cells with the MS-275, a HDAC1 and HDAC3 activity inhibitor which prevents beta cell death elicited by cytokines, is beneficial for combating beta cell dysfunction caused by palmitate. We show that culture of isolated human islets and MIN6 cells with MS-275 reduced apoptosis evoked by palmitate. The protective effect of MS-275 was associated with the attenuation of the expression of Atf3 and Chop. Silencing of HDAC3, but not of HDAC1, mimicked the effects of MS-275 on the expression of the two ER stress markers and apoptosis. These data point to HDAC3 as a potential drug target for preserving beta cells against lipotoxicity in diabetes.