NADH-cytochrome b5 oxidoreductase (Ncb5or) is an endoplasmic reticulum (ER)-associated redox enzyme involved in fatty acid metabolism, and phenotypic abnormalities of Ncb5or(-/-) mice include diabetes and lipoatrophy. These mice are lean and insulin-sensitive but become hyperglycemic at age 7 weeks as a result of β-cell dysfunction and loss. Here we examine early cellular and molecular events associated with manifestations of β-cell defects in Ncb5or(-/-) mice. We observe lower islet β-cell content in pancreata at age 4 weeks and prominent ER distention in β-cells by age 5 weeks. Ultrastructural changes progress rapidly in severity from age 5 to 6 weeks, and their frequency rises from 10% of β-cells at 5 weeks to 33% at 6 weeks. These changes correlate temporally with the onset of diabetes. ER stress responses and lipid load in Ncb5or(-/-) β-cells were assessed with isolated islets from mice at age 5 weeks. Expression levels of the stress marker protein Grp78/BiP and of phosphorylated eIF2α protein were found to be reduced, although their transcript levels did not decline. This pattern stands in contrast to the canonical unfolded protein response. Ncb5or(-/-) β-cells also accumulated higher intracellular levels of palmitate and other free fatty acids and exhibited greater reactive oxygen species production than wild-type cells. An alloxan-susceptible genetic background was found to confer accelerated onset of diabetes in Ncb5or(-/-) mice. These findings provide the first direct evidence that manifestations of diabetes in lean Ncb5or(-/-) mice involve saturated free fatty acid overload of β-cells and ER and oxidative stress responses.