The endoplasmic reticulum (ER) lumen is not only the major site for the assembly and folding of newly synthesized proteins but also the main intracellular Ca2+ store. Ca2+ ions are involved in versatile biochemical processes, including posttranslational processing and folding of nascent proteins. Disruption of ER Ca2+ homeostasis is usually accompanied by an ER stress response that can ultimately lead to apoptosis if unresolved. Abnormal ER Ca2+ depletion has been linked to pancreatic β‐cell dysfunction and death under lipotoxic conditions. However, the underlying mechanisms how the β‐cell toxic saturated free fatty acid palmitate perturbs ER Ca2+ homeostasis and its interplay with other organelles are not fully understood. In the present study, we demonstrate that treatment of insulin‐secreting INS‐1E cells with palmitate diminished ER Ca2+ levels, elevated cytosolic/mitochondrial Ca2+ content, lowered the mitochondrial membrane potential, and ATP content. In addition, palmitate‐pretreated β‐cells contained significantly less luminal Ca2+, revealed a severely impaired ER Ca2+ reuptake rate, and substantially lower insulin content. Importantly, detoxification of luminal H2O2 by expression of the ER‐resident glutathione peroxidase 8 (GPx8) abrogated the lipotoxic effects of palmitate. Moreover, GPx8 supported oxidative protein folding and preserved insulin content under lipotoxic conditions. A direct involvement of luminal H2O2 in palmitate‐mediated ER Ca2+ depletion could be corroborated by the ectopic expression of an ER‐luminal active catalase. Our data point to the critical role of luminal H2O2 in palmitate‐mediated depletion of ER Ca2+ through redox‐dependent impairment of Ca2+ ATPase pump activity upstream of mitochondrial dysfunction in insulin‐secreting INS‐1E cells.