BTBR mice develop severe diabetes in response to genetically induced obesity due to a failure of the β-cells to compensate for peripheral insulin resistance. In analyzing BTBR islet gene expression patterns, we observed that Pgter3, the gene for the prostaglandin E receptor 3 (EP3), was upregulated with diabetes. The EP3 receptor is stimulated by prostaglandin E2 (PGE2) and couples to G-proteins of the Gi subfamily to decrease intracellular cAMP, blunting glucose-stimulated insulin secretion (GSIS). Also upregulated were several genes involved in the synthesis of PGE2. We hypothesized that increased signaling through EP3 might be coincident with the development of diabetes and contribute to β-cell dysfunction. We confirmed that the PGE2-to-EP3 signaling pathway was active in islets from confirmed diabetic BTBR mice and human cadaveric donors, with increased EP3 expression, PGE2 production, and function of EP3 agonists and antagonists to modulate cAMP production and GSIS. We also analyzed the impact of EP3 receptor activation on signaling through the glucagon-like peptide (GLP)-1 receptor. We demonstrated that EP3 agonists antagonize GLP-1 signaling, decreasing the maximal effect that GLP-1 can elicit on cAMP production and GSIS. Taken together, our results identify EP3 as a new therapeutic target for β-cell dysfunction in T2D.