Although obesity is associated with insulin resistance, most obese humans and rodents remain normoglycemic because of compensatory hyperinsulinemia. This has been attributed to beta-cell hyperplasia and increased low Km glucose metabolism of islets. Since free fatty acids (FFA) can induce these same beta-cell changes in normal islets of Wistar rats and since plasma FFA are increased in obesity, FFA could be the signal from adipocytes that elicits beta-cell compensation sufficient to prevent diabetes. To determine if FFA-induced compensation is impaired in islets of rats with a diabetogenic mutation, the Zucker diabetic fatty (ZDF) rat, we cultured islets from 6-week-old obese (fa/fa) rats that had compensated for obesity and apparently normal islets from lean ZDF rats (fa/+) in 0, 1, or 2 mM FFA. Low Km glucose usage rose 2.5-fold in FFA-cultured control islets from age-matched Wistar rats, but failed to rise in either the precompensated islets of ZDF rats or in islets of lean ZDF rats. Bromodeoxyuridine incorporation increased 3.2-fold in Wistar islets but not in islets from obese or lean ZDF rats. Insulin secretion doubled in normal islets cultured in 2 mM FFA (p < 0.01) but increased only slightly in islets from lean ZDF rats (not significant) and declined in islets from obese ZDF rats (p < 0.05). We conclude that, unlike the islets of age-matched Wistar rats, islets of 6-week-old heterozygous and homozygous ZDF rats lack the capacity for FFA-induced enhancement of beta-cell function.