Fatty acids may promote type 2 diabetes by altering insulin secretion from pancreatic beta cells, a process known as lipotoxicity. The underlying mechanisms are poorly understood. To test the hypothesis that peroxisome proliferator-activated receptor alpha (PPARalpha) has a direct effect on islet function, we treated INS-1 cells, an insulinoma cell line, with a PPARalpha adenovirus (AdPPARalpha) as well as the PPARalpha agonist clofibric acid. AdPPARalpha-infected INS-1 cells showed PPARalpha agonist- and fatty acid-dependent transactivation of a PPARalpha reporter gene. Treatment with either AdPPARalpha or clofibric acid increased both catalase activity (a marker of peroxisomal proliferation) and palmitate oxidation. AdPPARalpha induced carnitine-palmitoyl transferase-I (CPT-I) mRNA, but had no effect on insulin gene expression. AdPPARalpha treatment increased cellular triglyceride content but clofibric acid did not. Both AdPPARalpha and clofibric acid decreased basal and glucose-stimulated insulin secretion. Despite increasing fatty acid oxidation, AdPPARalpha did not increase cellular ATP content suggesting the stimulation of uncoupled respiration. Consistent with these observations, UCP2 expression doubled in PPARalpha-treated cells. Clofibric acid-induced suppression of glucose-simulated insulin secretion was prevented by the CPT-I inhibitor etomoxir. These data suggest that PPARalpha-stimulated fatty acid oxidation can impair beta cell function.