Physical activity improves glycemic control in type 2 diabetes (T2D), but its contribution to preserving β-cell function is uncertain. We evaluated the role of physical activity on β-cell secretory function and glycerolipid/fatty acid (GL/FA) cycling in male Zucker diabetic fatty (ZDF) rats. Six-week-old ZDF rats engaged in voluntary running for 6 wk (ZDF-A). Inactive Zucker lean and ZDF (ZDF-I) rats served as controls. ZDF-I rats displayed progressive hyperglycemia with β-cell failure evidenced by falling insulinemia and reduced insulin secretion to oral glucose. Isolated ZDF-I rat islets showed reduced glucose-stimulated insulin secretion expressed per islet and per islet protein. They were also characterized by loss of the glucose regulation of fatty acid oxidation and GL/FA cycling, reduced mRNA expression of key β-cell genes, and severe reduction of insulin stores. Physical activity prevented diabetes in ZDF rats through sustaining β-cell compensation to insulin resistance shown in vivo and in vitro. Surprisingly, ZDF-A islets had persistent defects in fatty acid oxidation, GL/FA cycling, and β-cell gene expression. ZDF-A islets, however, had preserved islet insulin mRNA and insulin stores compared with ZDF-I rats. Physical activity did not prevent hyperphagia, dyslipidemia, or obesity in ZDF rats. In conclusion, islets of ZDF rats have a susceptibility to failure that is possibly due to altered β-cell fatty acid metabolism. Depletion of pancreatic islet insulin stores is a major contributor to islet failure in this T2D model, preventable by physical activity.