Hypothalamic insulin signaling is essential to the maintenance of glucose and energy homeostasis. During pathological states, such as obesity and type 2 diabetes mellitus, insulin signaling is impaired. One key mechanism involved in the development of insulin resistance is lipotoxicity, through increased circulating saturated fatty acids. Although many studies have begun to determine the underlying mechanisms of lipotoxicity in peripheral tissues, little is known about the effects of excess lipids in the brain. We used a hypothalamic, neuronal cell model, mHypoE-44, to understand how the highly prevalent nonesterified fatty acid, palmitate, affects neuronal insulin signaling. Through Western blot analysis, we discerned that prolonged exposure to palmitate impairs insulin activation, as assessed by phosphorylation of Akt. We investigated the role of endoplasmic reticulum (ER) stress, which is known to promote cellular insulin resistance and apoptosis in peripheral tissues. Palmitate treatment induced ER stress through a c-Jun N-terminal kinase (JNK)-dependent pathway because a selective JNK inhibitor blocked palmitate activation of the ER stress pathways eIF2 alpha and X-box binding protein-1. Interestingly, JNK inhibition did not prevent the palmitate-mediated cleaved caspase-3 increase, an apoptotic marker, or insulin signaling attenuation. However, pretreatment with the AMP kinase activator, aminoimidazole carboxamide ribonucleotide, blocked JNK phosphorylation and importantly prevented caspase-3 cleavage and restored insulin signaling during short-term exposure to palmitate. Thus, activation of AMP kinase prevents the deleterious effects of palmitate on hypothalamic neurons by inhibiting the onset of insulin resistance and apoptosis.