The thiazolidinedione compound troglitazone, which is used to treat non-insulin-dependent diabetes mellitus (NIDDM) in man, is also effective in the adipogenic NIDDM of Zucker diabetic fatty (ZDF) rats. To test the "lipotoxicity hypothesis," which attributes the beta cell dysfunction of adipogenic NIDDM to an excessive accumulation of fat in the pancreatic islets, we sought to determine if troglitazone-mediated amelioration of beta cell function in islets of ZDF rats might be associated with a reduction in their elevated triglyceride (TG) content. Troglitazone (10 microM) in the culture medium reduced the TG content of ZDF rats by 52%; this was reflected by decreased esterification and increased oxidation of [3H]palmitate. Glycerol-3-phosphate acyltransferase mRNA fell by 57% and acyl-CoA synthetase mRNA by 67% (brain isoform) and 38% (liver isoform), all consistent with the effects of troglitazone on TG metabolism. The 52% decrease in islet TG was accompanied by >30- and 2-fold improvements in glucose- and arginine-stimulated insulin secretion, respectively. We conclude that troglitazone exerts direct lipopenic activity in normal islets and in islets of obese prediabetic ZDF rats; in the latter, this correlated with improvement in beta cell function. The results are consistent with the lipotoxicity hypothesis for adipogenic diabetes.