Fatty acid (FA)-stimulated insulin secretion (FASIS) is reviewed here in contrast to type 2 diabetes etiology, resulting from FA overload, oxidative stress, intermediate hyperinsulinemia, and inflammation, all converging into insulin resistance. Focusing on pancreatic islet β-cells, we compare the physiological FA roles with the pathological ones. Considering FAs not as mere amplifiers of glucose-stimulated insulin secretion (GSIS), but as parallel insulin granule exocytosis inductors, partly independent of the K_ATP channel closure, we describe the FA initiating roles in the prediabetic state that is induced by retardations in the glycerol-3-phosphate (glucose)-promoted glycerol/FA cycle and by the impaired GPR40/FFA1 (free FA1) receptor pathway, specifically in its amplification by the redox-activated mitochondrial phospholipase, iPLA2γ. Also, excessive dietary FAs stimulate intestine enterocyte incretin secretion, further elevating GSIS, even at low glucose levels, thus contributing to diabetic hyperinsulinemia. With overnutrition and obesity, the FA overload causes impaired GSIS by metabolic dysbalance, paralleled by oxidative and metabolic stress, endoplasmic reticulum stress and numerous pro-apoptotic signaling, all leading to decreased β-cell survival. Lipotoxicity is exerted by saturated FAs, whereas ω-3 polyunsaturated FAs frequently exert antilipotoxic effects. FA-facilitated inflammation upon the recruitment of excess M1 macrophages into islets (over resolving M2 type), amplified by cytokine and chemokine secretion by β-cells, leads to an inevitable failure of pancreatic β-cells.