To directly assess the role of beta cell lipolysis in insulin secretion and whole-body energy homeostasis, inducible beta cell-specific adipose triglyceride lipase (ATGL)-deficient (B-Atgl-KO) mice were studied under normal diet (ND) and high-fat diet (HFD) conditions. Atgl flox/flox mice were cross-bred with Mip-Cre-ERT mice to generate Mip-Cre-ERT/+;Atgl flox/flox mice. At 8 weeks of age, these mice were injected with tamoxifen to induce deletion of beta cell-specific Atgl (also known as Pnpla2), and the mice were fed an ND or HFD. ND-fed male B-Atgl-KO mice showed decreased insulinaemia and glucose-induced insulin secretion (GSIS) in vivo. Changes in GSIS correlated with the islet content of long-chain saturated monoacylglycerol (MAG) species that have been proposed to be metabolic coupling factors for insulin secretion. Exogenous MAGs restored GSIS in B-Atgl-KO islets. B-Atgl-KO male mice fed an HFD showed reduced insulinaemia, glycaemia in the fasted and fed states and after glucose challenge, as well as enhanced insulin sensitivity. Moreover, decreased insulinaemia in B-Atgl-KO mice was associated with increased energy expenditure, and lipid metabolism in brown (BAT) and white (WAT) adipose tissues, leading to reduced fat mass and body weight. ATGL in beta cells regulates insulin secretion via the production of signalling MAGs. Decreased insulinaemia due to lowered GSIS protects B-Atgl-KO mice from diet-induced obesity, improves insulin sensitivity, increases lipid mobilisation from WAT and causes BAT activation. The results support the concept that fuel excess can drive obesity and diabetes via hyperinsulinaemia, and that an islet beta cell ATGL-lipolysis/adipose tissue axis controls energy homeostasis and body weight via insulin secretion.