Dietary fructose, especially in the context of a high-fat western diet, has been linked to type 2 diabetes. Although the effect of fructose on liver metabolism has been extensively studied, a significant portion of the fructose is first metabolized in the small intestine. Here, we report that dietary fat enhances intestinal fructose metabolism, which releases glycerate into the blood. Chronic high systemic glycerate levels induce glucose intolerance by slowly damaging pancreatic islet cells and reducing islet sizes. Our findings provide a link between dietary fructose and diabetes that is modulated by dietary fat.