Autophagy is indispensable for the proper architecture and flawless functioning of pancreatic β-cells. A growing body of evidence indicates reciprocal communication between autophagic pathways, apoptosis, and intracellular lipids. The way in which elevated levels of free saturated or unsaturated FAs contribute to progressive β-cell failure remains incompletely understood. Stearoyl-CoA desaturase (SCD)1, a key regulatory enzyme in biosynthesis of MUFAs, was shown to play an important role in regulation of β-cell function. Here, we investigated whether SCD1 activity is engaged in palmitate-induced pancreatic β-cell autophagy. We found augmented apoptosis and diminished autophagy upon cotreatment of INS-1E cells with palmitate and an SCD1 inhibitor. Furthermore, we found that additional treatment of the cells with monensin, an inhibitor of autophagy at the step of fusion, exacerbates palmitate-induced apoptosis. Accordingly, diminished SCD1 activity affected the accumulation, composition, and saturation status of cellular membrane phospholipids and neutral lipids. Such an effect was accompanied by aberrant endoplasmic reticulum stress, mitochondrial injury, and decreases in insulin secretion and cell proliferation. Our data reveal a novel mechanism by which the inhibition of SCD1 activity affects autophagosome-lysosome fusion because of perturbations in cellular membrane integrity, thus leading to an aberrant stress response and β-cell failure.