We determined the effect of 48-h elevation of plasma free fatty acids (FFA) on insulin secretion during hyperglycemic clamps in control female Wistar rats (group a) and in the following female rat models of progressive β-cell dysfunction: lean Zucker diabetic fatty (ZDF) rats, both wild-type (group b) and heterozygous for the fa mutation in the leptin receptor gene (group c); obese (fa/fa) Zucker rats (nonprediabetic; group d); obese prediabetic (fa/fa) ZDF rats (group e); and obese (fa/fa) diabetic ZDF rats (group f). FFA induced insulin resistance in all groups but increased C-peptide levels (index of absolute insulin secretion) only in obese prediabetic ZDF rats. Insulin secretion corrected for insulin sensitivity using a hyperbolic or power relationship (disposition index or compensation index, respectively, both indexes of β-cell function) was decreased by FFA. The decrease was greater in normoglycemic heterozygous lean ZDF rats than in Wistar controls. In obese “prediabetic” ZDF rats with mild hyperglycemia, the FFA-induced decrease in β-cell function was no greater than that in obese Zucker rats. However, in overtly diabetic obese ZDF rats, FFA further impaired β-cell function. In conclusion, 1) the FFA-induced impairment in β-cell function is accentuated in the presence of a single copy of a mutated leptin receptor gene, independent of hyperglycemia. 2) In prediabetic ZDF rats with mild hyperglycemia, lipotoxicity is not accentuated, as the β-cell mounts a partial compensatory response for FFA-induced insulin resistance. 3) This compensation is lost in diabetic rats with more marked hyperglycemia and loss of glucose sensing.