IDX-1 (islet/duodenum homeobox-1) is a transcription factor expressed in the duodenum and pancreatic beta and delta cells. It is required for embryonic development of the pancreas and transactivates the Glut2, glucokinase, insulin, and somatostatin genes. Here we show that exposure of isolated rat pancreatic islets to palmitic acid induced a approximately 70% decrease in IDX-1 mRNA and protein expression as well as 40 and 65% decreases in the binding activity of IDX-1 for its cognate cis-regulatory elements of the Glut2 and insulin promoters, respectively. The inhibitory effect of palmitic acid required its mitochondrial oxidation since it was prevented by the carnitine palmitoyltransferase I inhibitor bromopalmitic acid. The palmitic acid effect on IDX-1 was correlated with decreases in GLUT2 and glucokinase expression of 40 and 25%, respectively, at both the mRNA and protein levels. Insulin and somatostatin mRNA expression was also decreased by 40 and 60%, whereas glucagon mRNA expression was not modified. After 48 h of exposure to fatty acids, total islet insulin, somatostatin, and glucagon contents were decreased by 85, 55, and 65%, respectively. At the same time, total hormone release was strongly stimulated (13-fold) for glucagon, whereas its was only marginally increased for insulin and somatostatin (1.5- and 1.7-fold, respectively). These results indicate that elevated fatty acid levels 1) negatively regulate Idx-1 expression; 2) decrease the expression of genes transactivated by IDX-1 such as those for GLUT2, glucokinase, insulin, and somatostatin; and 3) lead to an important increase in glucagon synthesis and secretion. Fatty acids thus have pleiotropic effects on pancreatic islet gene expression, and the negative control of Idx-1 expression may be an initial event in the development of these multiple defects.