There are clear epidemiological associations between circadian disruption, obesity, and pathogenesis of type 2 diabetes. The mechanisms driving these associations are unclear. In the current study, we hypothesized that continuous exposure to constant light (LL) compromises pancreatic β-cell functional and morphological adaption to diet-induced obesity leading to development of type 2 diabetes. To address this hypothesis, we studied wild type Sprague Dawley as well as Period-1 luciferase reporter transgenic rats (Per1-Luc) for 10 weeks under standard light-dark cycle (LD) or LL with concomitant ad libitum access to either standard chow or 60% high-fat diet (HFD). Exposure to HFD led to a comparable increase in food intake, body weight, and adiposity in both LD- and LL-treated rats. However, LL rats displayed profound loss of behavioral circadian rhythms as well as disrupted pancreatic islet clock function characterized by the impairment in the amplitude and the phase islet clock oscillations. Under LD cycle, HFD did not adversely alter diurnal glycemia, diurnal insulinemia, β-cell secretory function as well as β-cell survival, indicating successful adaptation to increased metabolic demand. In contrast, concomitant exposure to LL and HFD resulted in development of hyperglycemia characterized by loss of diurnal changes in insulin secretion, compromised β-cell function, and induction of β-cell apoptosis. This study suggests that circadian disruption and diet-induced obesity synergize to promote development of β-cell failure, likely mediated as a consequence of impaired islet clock function.