Type 2 diabetes is associated with increased plasma FFA levels and reduced adiponectin levels¹ . Pancreatic β-cells are particularly susceptible to the effects of lipotoxicity and adiponectin replacement therapy is a promising alternative for treatment of type 2 diabetes² . However, the precise mechanism(s) by which chronic exposure to palmitate represses insulin gene expression in pancreatic β cells remains largely unknown. Here we show that both globular adiponectin and full-length adiponectin enhance β-cell viability and reduce cell death by apoptosis in insulinoma INS-1 β cells exposed chronically to high glucose levels. Moreover, these effects were also observed in INS-1cells exposed chronically to high glucose levels with 500 μM palmitate when treated with globular adiponectin, but not when treated with full-length adiponectin. Serine palmitoyl transferase (SPT) inhibitor myriocin (10 μM) inhibits cellular ceramide accumulation and attenuated palmitate-induced repression of C/EBPβ and insulin gene expression, and exogenous c2-ceramide (50 μM) induced expression of C/EBPβ and repressed expression of insulin in INS-1 cells and isolated pancreatic rat islets. Our study provides strong evidence for a protective effect of adiponectin in pancreatic β cells during states of glucotoxicity and lipotoxicity. In addition, our findings indicate that ceramide C/EBPβ-dependently mediates the repressive effect of palmitate on activity of the insulin promoter. We are currently investigating the protective effects of adiponectin to elucidate the underlying molecular mechanism(s) of ceramide-mediated induction of C/EBPβ expression and repression of insulin expression.