Chronic exposure to elevated levels of fatty acids (FAs) in conjunction with chronic hyperglycemia has been reported to contribute to the progressive deterioration of β-cell function in patients with type 2 diabetes mellitus. The long-chain saturated free fatty acid (FFA) palmitate, unlike the unsaturated FFA oleate, is known to have an inhibitory effect on proinsulin gene expression through ceramide synthesis. This study was aimed at investigating whether this effect was exacerbated by the inhibition of ceramide degradation in pancreatic β-cells and the molecular mechanism of intracellular ceramide-induced inhibition of proinsulin gene transcription in response to exposure to palmitate. We exposed insulin-secreting (INS-1) cells treated with low levels of palmitate to the ceramidase inhibitor n-oleoylethanolamine (NOE); this led to the generation of high levels of intracellular ceramide. We observed that the effects of ceramide accumulation in INS-1 cells were similar to the effects of the inhibition of this protein on proinsulin mRNA levels that are caused by the negative regulation of insulin promoter activity. In addition, we observed that ceramide accumulation induced by NOE leads to a significant decrease in the levels of activated extracellular signal-regulated kinase (ERK); the inactivation of the ERK cascade in response to palmitate stimuli is induced by protein phosphatase 2A (PP2A) activity. Based on these findings, we suggest that the aberrant accumulation of ceramide was caused by the inhibition of ceramide metabolism, which in turn leads to the inhibition of proinsulin gene expression; the inhibition of ERK cascades by PP2A serves as an important factor in the inhibitory effects of ceramide.