Extracellular ATP released from pancreatic β cells acts as a potent insulinotropic agent through activation of P2 purinergic receptors. Ectonucleotidases, a family of membrane-bound nucleotide metabolizing enzymes, regulate extracellular ATP levels by degrading ATP and related nucleotides. Ectonucleotidase activity affects the relative proportion of ATP and its metabolites, which in turn will impact the level of purinergic receptor stimulation exerted by extracellular ATP. We therefore investigated the expression and role of ectonucleotidases in pancreatic β cells. Of the ectonucleotidases studied, only ENTPD3 (gene encoding NTPDase3 enzyme) mRNA was detected at fairly abundant levels in human and mouse pancreatic islets as well as in insulin secreting MIN6 cells. ARL67156, a selective ectonucleotidase inhibitor, blocked degradation of extracellular ATP that was added to MIN6 cells. The compound also decreased degradation of endogenous ATP released from cells. Measurements of insulin secretion in MIN6 cells as well as in mouse and human pancreatic islets demonstrated that ARL67156 potentiated glucose dependent insulin secretion. Down-regulation of NTPDase3 expression in MIN6 cells with the specific siRNA replicated effects of ARL67156 on extracellular ATP hydrolysis and insulin secretion. Our results demonstrate that NTPDase3 is the major ectonucleotidase in pancreatic β cells in multiple species and that it modulates insulin secretion by controlling activation of purinergic receptors.