Acot7, encoding acyl-CoA thioesterase-7, is one of ∼60 genes expressed ubiquitously across tissues but relatively silenced, or “disallowed”, in pancreatic β-cells. The capacity of ACOT7 to hydrolyse long-chain acyl-CoA esters suggests potential roles in β-oxidation, lipid biosynthesis, signal transduction or insulin exocytosis. Here, we explored the physiological relevance of β-cell-specific Acot7 silencing by re-expressing ACOT7 in these cells. ACOT7 overexpression in clonal MIN6 and INS1(832/13) β-cells impaired insulin secretion in response to glucose plus fatty acids. Furthermore, examined in a panel of transgenic mouse lines, we demonstrate that overexpression of mitochondrial ACOT7 selectively in the adult β-cell reduced glucose tolerance dose-dependently and impaired glucose-stimulated insulin secretion. By contrast, depolarisation-induced secretion was unaffected, arguing against a direct action on the exocytotic machinery. Acyl-CoA levels, ATP/ADP increases, membrane depolarization and Ca2+ fluxes were all markedly reduced in transgenic mouse islets, whereas glucose-induced O2-consumption was unchanged. Whilst glucose-induced increases in ATP/ADP ratio were similarly lowered after ACOT7 over-expression in INS1(832/13) cells, changes in mitochondrial membrane potential (ΔΨ) were unaffected, consistent with an action of Acot7 to increase cellular ATP consumption. Since Acot7 mRNA levels are increased in human islets in type 2 diabetes, inhibition of the enzyme might provide a novel therapeutic strategy.