Mitogen-activated protein kinase phosphatase-5 (MKP-5) is a regulator of extracellular signaling that is known to regulate lipid metabolism. In this study, we found that obesity caused by a high-fat diet (HFD) decreased the expression of MKP-5 in the pancreas and primary islet cells derived from mice. Then, we further investigated the role of MKP-5 in the protection of islet cells from lipotoxicity by modulating MKP-5 expression. As a critical inducer of lipotoxicity, palmitic acid (PA) was used to treat islet β-cells. We found that MKP-5 overexpression restored PA-mediated autophagy inhibition in Rin-m5f cells and protected these cells from PA-induced apoptosis and dysfunction. Consistently, a lack of MKP-5 aggravated the adverse effects of lipotoxicity. Islet cells from HFD-fed mice were infected using recombinant adenovirus expressing MKP-5 (Ad-MKP-5), and we found that Ad-MKP-5 was able to alleviate HFD-induced apoptotic protein activation and relieve the HFD-mediated inhibition of functional proteins. Notably, HFD-mediated impairments in autophagic flux were restored by Ad-MKP-5 transduction. Furthermore, the autophagy inhibitor 3-methyladenine (3-MA) was used to treat Rin-m5f cells, confirming that the MKP-5 overexpression suppressed apoptosis, dysfunction, inflammatory response, and oxidative stress induced by PA via improving autophagic signaling. Lastly, employing c-Jun amino-terminal kinas (JNK), P38, or extracellular-regulated kinase (ERK) inhibitors, we established that the JNK and P38 MAPK pathways were involved in the MKP-5-mediated apoptosis, dysfunction, and autophagic inhibition observed in islet β cells in response to lipotoxicity.