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Elevated basal insulin secretion under fasting conditions together with insufficient stimulated insulin release is an important hallmark of type 2 diabetes, but the mechanisms controlling basal insulin secretion remain unclear. Membrane rafts exist in pancreatic islet cells and spatially organize membrane ion channels and proteins controlling exocytosis, which may contribute to the regulation of insulin secretion. Membrane rafts (cholesterol and sphingolipid containing microdomains) were dramatically reduced in human type 2 diabetic and diabetic Goto-Kakizaki (GK) rat islets when compared with healthy islets. Oxidation of membrane cholesterol markedly reduced microdomain staining intensity in healthy human islets, but was without effect in type 2 diabetic islets. Intriguingly, oxidation of cholesterol affected glucose-stimulated insulin secretion only modestly, whereas basal insulin release was elevated. This was accompanied by increased intracellular Ca2+ spike frequency and Ca2+ influx and explained by enhanced single Ca2+ channel activity. These results suggest that the reduced presence of membrane rafts could contribute to the elevated basal insulin secretion seen in type 2 diabetes.