Background: The combination of elevated glucose and free-fatty acids (FFA), prevalent in diabetes, has been suggested to be a major contributor to pancreatic β-cell death. This study examines the synergistic effects of glucose and FFA on β-cell apoptosis and the molecular mechanisms involved. Mouse insulinoma cells and primary islets were treated with palmitate at increasing glucose and effects on apoptosis, endoplasmic reticulum (ER) stress and insulin receptor substrate (IRS) signaling were examined. Principal Findings: Increasing glucose (5-25 mM) with palmitate (400 μM) had synergistic effects on apoptosis. Jun NH2-terminal kinase (JNK) activation peaked at the lowest glucose concentration, in contrast to a progressive reduction in IRS2 protein and impairment of insulin receptor substrate signaling. A synergistic effect was observed on activation of ER stress markers, along with recruitment of SREBP1 to the nucleus. These findings were confirmed in primary islets. The above effects associated with an increase in glycogen synthase kinase 3β (Gsk3β) activity and were reversed along with apoptosis by an adenovirus expressing a kinase dead Gsk3β. Conclusions/Significance: Glucose in the presence of FFA results in synergistic effects on ER stress, impaired insulin receptor substrate signaling and Gsk3β activation. The data support the importance of controlling both hyperglycemia and hyperlipidemia in the management of Type 2 diabetes, and identify pancreatic islet β-cell Gsk3β as a potential therapeutic target.