The failure of pancreatic β-cells to supply insulin in quantities sufficient to maintain euglycemia is a hallmark of type2 diabetes. Perturbation of β-cell cholesterol homeostasis, culminating in elevated intracellular cholesterol levels, impairs insulin secretion and has therefore been proposed as a mechanism contributing to β-cell dysfunction. The manner in which this occurs, however, is unclear. Cholesterol is an essential lipid, as well as a major component of membrane rafts, and numerous proteins critical for the regulation of insulin secretion have been reported to associate with these domains. Although this suggests that alterations in membrane rafts could partially account for the reduction in insulin secretion observed when β-cell cholesterol accumulates, this has not yet been demonstrated. In this review, we provide a brief overview of recent work implicating membrane rafts in some of the basic molecular mechanisms of insulin secretion, and discuss the insight it provides into the β-cell dysfunction characteristic of type2 diabetes.