Lipid perturbations associated with triglyceride overstorage in beta-cells impair insulin secretion, a process termed lipotoxicity. To assess the role of hormone-sensitive lipase, which is expressed and enzymatically active in beta-cells, in the development of lipotoxicity, we generated transgenic mice overexpressing hormone-sensitive lipase specifically in beta-cells. Transgenic mice developed glucose intolerance and severely blunted glucose-stimulated insulin secretion when challenged with a high-fat diet. As expected, both lipase activity and forskolin-stimulated lipolysis was increased in transgenic compared with wild-type islets. This was reflected in significantly lower triglycerides levels in transgenic compared with wild-type islets in mice receiving the high-fat diet, whereas no difference in islet triglycerides was found between the two genotypes under low-fat diet conditions. Our results highlight the importance of mobilization of the islet triglyceride pool in the development of beta-cell lipotoxicity. We propose that hormone-sensitive lipase is involved in mediating beta-cell lipotoxicity by providing ligands for peroxisome proliferator-activated receptors and other lipid-activated transcription factors, which in turn alter the expression of critical genes. One such gene might be uncoupling protein-2, which was found to be upregulated in transgenic islets, a change that was accompanied by decreased ATP levels.