Abnormally high levels of circulating free fatty acids can lead to pancreatic islet β-cell dysfunction and apoptosis, contributing to β-cell failure in Type 2 diabetes. The NAD+-dependent protein deacetylase Sirtuin-3 (SIRT3) has been implicated in Type 2 diabetes. In this study, we tested whether SIRT3 overexpression affects palmitate-induced β-cell dysfunction in cells of line NIT1, which are derived from mouse pancreatic β-cells. Two different lengths of SIRT3 were overexpressed: full length SIRT3 (SIRT3LF), which was preferentially targeted to mitochondria and partially to the nucleus, and its N-terminal truncated form (SIRT3SF), which was located in the nucleus and cytoplasm. Overexpression of SIRT3LF and SIRT3SF using an adenoviral system alleviated palmitate-induced lipotoxicity such as reduction of cell viability and mitogen-activated protein kinase (MAPK) activation. Chronic exposure to low concentrations of palmitate suppressed glucose-stimulated insulin secretion, but the suppression was effectively reversed by overexpression of SIRT3LF or SIRT3SF. The mRNA levels of the endoplasmic reticulum (ER) stress responsive genes ATF4, GRP94 and FKBP11 were increased by palmitate treatment, but the increases were completely inhibited by SIRT3LF overexpression and less effectively inhibited by SIRT3SF overexpression. This result suggests that overexpression of SIRT3 inhibits induction of ER stress by palmitate. Collectively, we conclude that overexpression of SIRT3 alleviates palmitate-induced β-cell dysfunction.