Lipid accumulation in nonadipose tissues is closely related to the development of type 2 diabetes in obese subjects. We examined the potential preventive effect of peroxisome proliferator-activated receptor (PPAR)-α and PPAR-γ stimulation on the development of diabetes in obese diabetes-prone OLETF rats. Chronic administration of a PPAR-α agonist (0.5% [wt/wt] fenofibrate) or a PPAR-γ agonist (3 mg · kg⁻¹ · day⁻¹ rosiglitazone) completely prevented the development of glycosuria. Pancreatic islets from untreated OLETF rats underwent sequential hypertrophy and atrophy, which was completely prevented by chronic fenofibrate treatment. In contrast, rosiglitazone treatment did not affect islet hypertrophy at earlier stages but prevented β-cell atrophy at later stages. Fenofibrate treatment decreased body weight and visceral fat, whereas rosiglitazone treatment increased body weight. Despite the opposite effects on adiposity, both drugs were equally effective in improving insulin actions in skeletal muscle. Furthermore, both drugs significantly decreased the triglyceride content in the soleus muscle and pancreatic islets. The present study demonstrates that the PPAR-α agonist fenofibrate prevents the development of diabetes in OLETF rats by reducing adiposity, improving peripheral insulin action, and exerting beneficial effects on pancreatic β-cells.