Dyslipidemia, particularly the elevated serum cholesterol levels, aggravate the pathophysiology of type 2 diabetes. In the present study we explored the relationship between fasting blood sugar and serum lipid parameters in human volunteers which revealed a significant linear effect of serum cholesterol on fasting blood glucose. Short term feeding of cholesterol enriched diet to rodent model resulted in elevated serum cholesterol levels, cholesterol accumulation in pancreatic islets and hyperinsulinemia with modest increase in plasma glucose level. To explore the mechanism, we treated cultured BRIN-BD11 pancreatic beta cells with soluble cholesterol. Our data shows that cholesterol treatment of cultured pancreatic beta cells enhances total cellular cholesterol. While one hour cholesterol exposure enhances insulin exocytosis, overnight cholesterol accumulation in cultured pancreatic beta cells affects cellular respiration, and inhibits Glucose stimulated insulin secretion. We further report that (E)-4-Chloro-2-(1-(2-(2,4,6-trichlorophenyl) hydrazono) ethyl) phenol (small molecule M1) prevents the cholesterol mediated blunting of cellular respiration and potentiates Glucose stimulated insulin secretion which was abolished in pancreatic beta cells on cholesterol accumulation.