Chronic hyperglycemia and hyperlipidemia can exert deleterious effects on beta-cell function, respectively referred to as glucotoxicity and lipotoxicity. Over time, both contribute to the progressive deterioration of glucose homeostasis characteristic of type 2 diabetes. The mechanisms of glucotoxicity involve several transcription factors and are, at least in part, mediated by generation of chronic oxidative stress. Lipotoxicity is probably mediated by accumulation of a cytosolic signal derived from the fatty acid esterification pathway. Our view that hyperglycemia is a prerequisite for lipotoxicity is supported by several recent studies performed in our laboratories. First, prolonged in vitro exposure of isolated islets to fatty acids decreases insulin gene expression in the presence of high glucose concentrations only, and glucose is rate-limiting for the incorporation of fatty acids into neutral lipids. Second, normalization of blood glucose in Zucker diabetic fatty rats prevents accumulation of triglycerides and impairment of insulin gene expression in islets, whereas normalization of plasma lipid levels is without effect. Third, high-fat feeding in Goto-Kakizaki rats significantly impairs glucose-induced insulin secretion in vitro, whereas a similar diet has no effect in normoglycemic animals. We propose that chronic hyperglycemia, independent of hyperlipidemia, is toxic for beta-cell function, whereas chronic hyperlipidemia is deleterious only in the context of concomitant hyperglycemia.