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Oxidative stress caused by the exposure of pancreatic ß-cells to high levels of fatty acids impairs insulin secretion. This lipotoxicity is thought to play an important role in ß-cell failure in type 2 diabetes and can be prevented by antioxidants. Gamma-hydroxybutyrate (GHB), an endogenous antioxidant and energy source, has previously been shown to protect mice from streptozotocin and alloxan-induced diabetes; both compounds are generators of oxidative stress and yield models of type-1 diabetes. We sought to determine whether GHB could protect mouse islets from lipotoxicity caused by palmitate, a model relevant to type 2 diabetes. We found that GHB prevented the generation of palmitate-induced reactive oxygen species and the associated lipotoxic inhibition of glucose-stimulated insulin secretion while increasing the NADPH/NADP+ ratio. GHB may owe its antioxidant and insulin secretory effects to the formation of NADPH.