In this review, we discuss the influence of peroxisome proliferator-activated receptor (PPAR)-α on islet insulin secretion and develop the hypothesis that modulation of PPAR-α function may be important for the regulation of compensatory insulin secretion. We have attempted to analyze the role of PPAR-α-linked fatty acid metabolism in islet function in health and in insulin-resistant states linked to lifestyle factors, in particular pregnancy and a diet inappropriately high in saturated fat. We have emphasized the potential for both actions of PPAR-α on insulin sensitivity that may be relayed systemically to the islet, leading to modulation of the insulin response in accordance with changes in insulin sensitivity, and direct effects of PPAR-α action on the islet itself. Finally, we have developed the concept that compensatory insulin secretion may have a function not only in glucoregulation but also in liporegulation. Thus, augmented insulin secretion may reflect a requirement for lipid lowering as well as for increased glucose disposal and is perceived to aim to compensate for impaired suppression of islet lipid delivery by insulin. This introduces the possibility of a continuum between liporegulation with islet compensation and lipodysregulation leading to islet decompensation in the development of type 2 diabetes.