Pancreatic β-cell dysfunction is central to the pathogenesis of type 2 diabetes, and the loss of functional β-cell mass in type 2 diabetes is at least in part secondary to increased β-cell apoptosis. Accumulating evidence suggests that endoplasmic reticulum (ER) stress is present in β-cells in type 2 diabetes. Free fatty acids (FFAs) cause ER stress and are putative mediators of β-cell dysfunction and death. In this review, we discuss the molecular mechanisms underlying ER stress induced by saturated and unsaturated FFAs. Oleate and palmitate trigger ER stress through ER Ca²⁺ depletion and build-up of unfolded proteins in the secretory pathway. Saturated and unsaturated FFAs elicit a differential signal transduction in the three branches of the ER stress response, resulting in different survival/apoptosis outcomes. The protection of β-cells against FFAs through the interference with ER stress signalling has opened novel therapeutic perspectives for type 2 diabetes. Chemical chaperones, salubrinal and glucagon-like peptide-1 (GLP-1) analogues have been used to protect β-cells from lipotoxic ER stress. Importantly, the pro- and antiapoptotic effects of these compounds are cell and context dependent.