OBJECTIVE - Insufficient insulin secretion is a hallmark of type 2 diabetes, and exposure of β-cells to elevated lipid levels (lipotoxicity) contributes to secretory dysfunction. Functional ablation of protein kinase Cε (PKCε) has been shown to improve glucose homeostasis in models of type 2 diabetes and, in particular, to enhance glucose-stimulated insulin secretion (GSIS) after lipid exposure. Therefore, we investigated the lipid-dependent mechanisms responsible for the enhanced GSIS after inactivation of PKCε. RESEARCH DESIGN AND METHODS - We cultured islets isolated from PKCε knockout (PKCεKO) mice in palmitate prior to measuring GSIS, Ca2+ responses, palmitate esterification products, lipolysis, lipase activity, and gene expression. RESULTS - The enhanced GSIS could not be explained by increased expression of another PKC isoform or by alterations in glucose-stimulated Ca2+ influx. Instead, an upregulation of the amplifying pathways of GSIS in lipid-cultured PKCεKO β-cells was revealed under conditions in which functional ATP-sensitive K+ channels were bypassed. Furthermore, we showed increased esterification of palmitate into triglyceride pools and an enhanced rate of lipolysis and triglyceride lipase activity in PKCεKO islets. Acute treatment with the lipase inhibitor orlistat blocked the enhancement of GSIS in lipid-cultured PKCεKO islets, suggesting that a lipolytic product mediates the enhancement of glucose-amplified insulin secretion after PKCε deletion. CONCLUSIONS - Our findings demonstrate a mechanistic link between lipolysis and the amplifying pathways of GSIS in murine β-cells, and they suggest an interaction between PKCε and lipolysis. These results further highlight the therapeutic potential of PKCε inhibition to enhance GSIS from the β-cell under conditions of lipid excess.