Preserving β cell function during the development of obesity and insulin resistance would limit the worldwide epidemic of type 2 diabetes (T2DM). Endoplasmic reticulum (ER) calcium (Ca2+) depletion induced by saturated free fatty acids and cytokines causes β cell ER stress and apoptosis, but the molecular mechanisms behind these phenomena are still poorly understood. Here, we demonstrate that palmitate-induced sorcin (SRI) down-regulation, and subsequent increases in glucose-6-phosphatase catalytic subunit-2 (G6PC2) levels contribute to lipotoxicity. SRI is a calcium sensor protein involved in maintaining ER Ca2+ by inhibiting ryanodine receptor activity and playing a role in terminating Ca2+-induced Ca2+ release. G6PC2, a GWAS gene associated with fasting blood glucose, is a negative regulator of glucose-stimulated insulin secretion (GSIS). High fat feeding in mice and chronic exposure of human islets to palmitate decreases endogenous SRI expression while levels of G6PC2 mRNA increase. Sorcin null mice are glucose intolerant, with markedly impaired GSIS and increased expression of G6pc2. Under high fat diet, mice overexpressing SRI in the β cell display improved glucose tolerance, fasting blood glucose and GSIS, whereas G6PC2 levels are decreased and cytosolic and ER Ca2+ are increased in transgenic islets. SRI may thus provide a target for intervention in T2DM.