Elevated extracellular lipids, such as the free fatty acid palmitate, can induce pancreatic beta cell endoplasmic reticulum (ER) stress and apoptosis, thereby contributing to the initiation and progression of type 2 diabetes. ATP-citrate lyase (ACLY), a key enzyme in cellular lipid production, was identified as a palmitate target in a proteomic screen. We investigated the effects of palmitate on ACLY activity and phosphorylation and its role in beta cell ER stress and apoptosis. We demonstrated that treatment of MIN6 cells, mouse islets and human islets with palmitate reduced ACLY protein levels. These in vitro results were validated by our finding that islets from high fat-fed mice had a significant decrease in ACLY, similar to that previously observed in type 2 diabetic human islets. Palmitate decreased intracellular acetyl-CoA levels to a similar degree as the ACLY inhibitor, SB-204990, suggesting a reduction in ACLY activity. ACLY inhibitors alone were sufficient to induce CCAAT/enhancer-binding protein homologues protein (CHOP)-dependent ER stress and caspase-3-dependent apoptosis. Similarly, even modest shRNA-mediated knockdown of ACLY caused a significant increase in beta cell apoptosis and ER stress. The effects of chemical ACLY inhibition and palmitate were non-additive and therefore potentially mediated by a common mechanism. Indeed, overexpression of ACLY prevented palmitate-induced beta cell death. These observations provide new evidence that ACLY expression and activity can be suppressed by exogenous lipids and demonstrate a critical role for ACLY in pancreatic beta cell survival. These findings add to the emerging body of evidence linking beta cell metabolism with programmed cell death.