Long-term exposure of pancreatic beta cells to elevated levels of fatty acids (FAs) impairs glucose-induced insulin secretion. However, the effects of FAs on insulin gene expression are controversial. We hypothesized that FAs adversely affect insulin gene expression only in the presence of elevated glucose concentrations. To test this hypothesis, isolated rat islets were cultured for up to 1 week in the presence of 2.8 or 16.7 mmol/L glucose with or without 0.5 mmol/L palmitate. Insulin release, insulin content, and insulin mRNA levels were determined at the end of each culture period. Palmitate increased insulin release at each time point independently of the glucose concentration. In contrast, insulin content was unchanged in the presence of palmitate at 2.8 mmol/L glucose, but was markedly decreased in the presence of 0.5 mmol/L palmitate and 16.7 mmol/L glucose after 2, 3, and 7 days of culture. In the presence of a basal concentration of glucose, insulin mRNA levels were transiently increased by palmitate at 24 hours but were unchanged thereafter. In contrast, palmitate significantly inhibited the stimulatory effects of 16.7 mmol/L glucose on insulin mRNA levels after 2, 3, and 7 days. To determine whether the inhibitory effect of palmitate on glucose-stimulated insulin mRNA levels was associated with decreased insulin promoter activity, HIT-T15 cells were cultured for 24 hours in 11.1 mmol/L glucose in the presence or absence of palmitate, and insulin gene promoter activity was measured in transient transfection experiments using the insulin promoter-reporter construct INSLUC. INSLUC activity was decreased more than 2-fold after 24 hours of exposure to 0.5 mmol/L palmitate. We conclude that long-term exposure of pancreatic beta cells to palmitate decreases insulin gene expression only in the presence of elevated glucose concentrations, in part through inhibition of insulin gene promoter activity.