We have investigated the in vitro effects of the saturated free fatty acid palmitate on mouse pancreatic β‐cells by a combination of electrophysiological recordings, intracellular Ca²⁺ ([Ca²⁺]_i) microfluorimetry and insulin release measurements. Addition of palmitate (1 mm, bound to fatty acid‐free albumin) to intact islets exposed to 15 mm glucose increased the [Ca²⁺]_i by ∼30% and insulin secretion 2‐fold. Palmitate remained capable of increasing [Ca²⁺]_i and insulin release in the presence of tolbutamide and in islets depolarized by high K⁺ in combination with diazoxide, indicating that the stimulation occurs independently of closure of ATP‐regulated K⁺ channels (K_ATP channels). Palmitate (0.5 mm) augmented exocytosis (measured as an increase in cell capacitance) in single β‐cells and increased the size of the readily releasable pool (RRP) of granules 2‐fold. Whole‐cell peak Ca²⁺ currents rose by ∼25% following addition of 0.5 mm palmitate, an effect that was abolished in the presence of 10 μm isradipine indicating that the free fatty acid specifically acts on L‐type Ca²⁺ channels. The actions of palmitate on exocytosis and Ca²⁺ currents were not mimicked by intracellular application of palmitoyl‐CoA. We conclude that palmitate increases insulin secretion by a K_ATP channel‐independent mechanism exerted at the level of exocytosis and that involves both augmentation of L‐type Ca²⁺ currents and an increased size of the RRP.