High circulating glucose and non-esterified (free) fatty acid levels can cause pancreatic β-cell failure. The molecular mechanisms of this β-cell glucolipotoxicity are yet to be established conclusively. In the present paper we report on the involvement of mitochondrial dysfunction in fatty-acid-induced β-cell failure. We have used state-of-the-art extracellular flux technology to functionally probe mitochondrial energy metabolism in intact INS-1E insulinoma cells in real-time. We show that 24-h palmitate exposure at high glucose attenuates the glucose-sensitivity of mitochondrial respiration and lowers coupling efficiency of glucose-stimulated oxidative phosphorylation. These mitochondrial defects coincide with an increased level of ROS (reactive oxygen species), impaired GSIS (glucose-stimulated insulin secretion) and decreased cell viability. Palmitate lowers absolute glucose-stimulated respiration coupled to ATP synthesis, but does not affect mitochondrial proton leak. Palmitate is not toxic when administered at low glucose unless fatty acid β-oxidation is inhibited. Palmitoleate, on the other hand, does not affect mitochondrial respiration, ROS levels, GSIS or cell viability. Although palmitoleate protects against the palmitate-induced ROS increase and cell viability loss, it does not protect against respiratory and insulin secretory defects. We conclude that mitochondrial dysfunction contributes to fatty-acid-induced GSIS impairment, and that glucolipotoxic cell viability and GSIS phenotypes are mechanistically distinct.