Saturated fatty acids are generally cytotoxic to β-cells. Accumulation of lipid intermediates and subsequent activation of lipid-mediated signals has been suggested to play a role in fatty acid-induced toxicity. To determine the effects of lipid metabolism in fatty acid-induced toxicity, lipid metabolism was modulated by up- and down-regulation of a lipogenic or fatty acid oxidation pathway, and the effects of various modulators on palmitate (PA)-induced INS-1 β-cell death were then evaluated. Treatment with the liver X receptor agonist T0901317 reduced PA-induced INS-1 cell death, regardless of its enhanced lipogenic activity. Furthermore, transient expression of a lipogenic transcription factor sterol regulatory element binding protein-1c (SREBP-1c) was also protective against PA-induced cytotoxicity. In contrast, knockdown of SREBP-1c or glycerol-3-phosphate acyltransferase 1 significantly augmented PA-induced cell death and reduced T0901317-induced protective effects. Conversely, T0901317 increased carnitine PA transferease-1 (CPT-1) expression and augmented PA oxidation. CPT-1 inhibitor etomoxir or CPT-1 knockdown augmented PA-induced cell death and reduced T0901317-induced protective effects, whereas the peroxisome proliferator-activated receptor (PPAR)-α agonist bezafibrate reduced PA-induced toxicity. In particular, T0901317 reduced the levels of PA-induced endoplasmic reticulum (ER) stress markers, including phospho-eukaryotic initiation factor-2α, phospho-C-Jun N terminal kinase, and CCAAT/enhancer-binding protein homologous protein. In contrast, knockdown of SREBP-1c or glycerol-3-phosphate acyltransferase 1 augmented PA-induced ER stress responses. Results of these experiments suggested that stimulation of lipid metabolism, including lipogenesis and fatty acid oxidation, protected β-cells from PA-induced lipotoxicity and that protection through enhanced lipogenesis was likely due to reduced ER stress.