Type 2 diabetes mellitus is characterized by dyslipidemia with elevated free fatty acids (FFAs). Loss of podocytes is a hallmark of diabetic nephropathy, and podocytes are highly susceptible to saturated FFAs but not to protective, monounsaturated FFAs. We report that patients with diabetic nephropathy develop alterations in glomerular gene expression of enzymes involved in fatty acid metabolism, including induction of stearoyl-CoA desaturase (SCD)-1, which converts saturated to monounsaturated FFAs. By IHC of human renal biopsy specimens, glomerular SCD-1 induction was observed in podocytes of patients with diabetic nephropathy. Functionally, the liver X receptor agonists TO901317 and GW3965, two known inducers of SCD, increased Scd-1 and Scd-2 expression in cultured podocytes and reduced palmitic acid–induced cell death. Similarly, overexpression of Scd-1 attenuated palmitic acid–induced cell death. The protective effect of TO901317 was associated with a reduction of endoplasmic reticulum stress. It was lost after gene silencing of Scd-1/-2, thereby confirming that the protective effect of TO901317 is mediated by Scd-1/-2. TO901317 also shifted palmitic acid–derived FFAs into biologically inactive triglycerides. In summary, SCD-1 up-regulation in diabetic nephropathy may be part of a protective mechanism against saturated FFA-derived toxic metabolites that drive endoplasmic reticulum stress and podocyte death.