Abstract Background The role of G protein-coupled receptor (GPR40), which is highly expressed in pancreatic beta cells, has been studied extensively in the amelioration of beta cell dysfunction in T2D using rat and mouse islets, beta cell lines and in animal models of diabetes. But its potential as a therapeutic target has not been fully explored. This aim of the study is to evaluate the therapeutic potential of CNX-011-67, a highly selective, potent and orally bioavailable GPR40 agonist, in controlling diabetes and other metabolic parameters. Methods Seven week old male ZDF rats were treated with either vehicle or CNX-011-67, 5 mg/kg twice daily, for seven weeks. The animals were subjected to oral glucose tolerance and insulin tolerance tests. Plasma glucose, insulin, triglyceride, HbA1c, fructosamine and free fatty acids were measured at selected time points. Pancreas from control and treated animals were subjected to insulin and pancreatic and duodenal homeobox 1 (PDX1) immunohistochemistry and were also evaluated by electron microscopy. Also the potential impact of CNX-011-67 on islet insulin secretion, content, ATP levels and markers of both glucose oxidation, beta cell health in rat islets under chronic glucolipotoxic conditions was evaluated. Results Treatment of male ZDF rats with CNX-011-67 for 7 weeks significantly enhanced insulin secretion in response to oral glucose load, delayed the onset of fasting hyperglycemia by 3 weeks, reduced nonfasting glucose excursions, fasting free fatty acids and triglyceride levels. A significant increase in PDX1 expression and insulin content and reduction in plasma fructosamine, HOMA-IR, and beta cell apoptosis were observed. CNX-011-67 improves glucose mediated insulin secretion, insulin gene transcription and islet insulin content in cultured rat islets under chronic glucolipotoxic condition. Also enhanced glucose oxidation in the form of increased islet ATP content and overall improvement in beta cell health in the form of reduced expression of stress markers (TXNIP and CHOP mRNA) were observed. Conclusions These findings, suggest that long-term oral therapy with CNX-011-67 could be of clinical value to provide good glycemic control and improve islet beta cell function.