We determined the effect of 48 h elevation of plasma free fatty acids (FFA) on insulin secretion during hyperglycemic clamps in a) control female Wistar rats and in the following female rat models of progressive cell dysfunction: lean ZDF rats, both b) wild type and c) heterozygous for the fa mutation in the leptin receptor gene; d) obese (fa/fa) Zucker rats (non-prediabetic); e) obese prediabetic (fa/fa) ZDF rats; and f) obese (fa/fa) diabetic ZDF rats. FFA induced insulin resistance in all groups but increased C-peptide levels (index of absolute insulin secretion) only in obese prediabetic ZDF rats. Insulin secretion corrected for insulin sensitivity using a hyperbolic or a power relationship (disposition index or compensation index resp., both indices of cell function) was decreased by FFA. The decrease was greater in normoglycemic heterozygous lean ZDF rats than Wistar controls. In obese ‘prediabetic’ZDF rats with mild hyperglycemia, the FFA-induced decrease in cell function was no greater than that in obese Zucker rats. However, in overtly diabetic obese ZDF rats, FFA further impaired cell function. Conclusions: 1) The FFA-induced impairment in cell function is accentuated in the presence of a single copy of a mutated leptin receptor gene, independent of hyperglycemia; 2) In prediabetic ZDF rats with mild hyperglycemia lipotoxicity is not accentuated as the cell mounts a partial compensatory response for FFA-induced insulin resistance; 3) This compensation is lost in diabetic rats with more marked hyperglycemia and loss of glucose sensing.