Pancreatic β cells secrete insulin in response to glucose elevation to maintain glucose homeostasis. A complex network of inter-organ communication operates to modulate insulin secretion and regulate glucose levels after a meal. Lipids obtained from diet or generated intracellularly are known to amplify glucose-stimulated insulin secretion, however, the underlying mechanisms are not completely understood. Here, we show that a Drosophila secretory lipase, Vaha (CG8093), is synthesized in the midgut and moves to the brain where it concentrates in the insulin-producing cells in a process requiring Lipid Transfer Particle, a lipoprotein originating in the fat body. In response to dietary fat, Vaha stimulates insulin-like peptide release (ILP), and Vaha deficiency results in reduced circulatory ILP and diabetic features including hyperglycemia and hyperlipidemia. Our findings suggest Vaha functions as a diacylglycerol lipase physiologically, by being a molecular link between dietary fat and lipid amplified insulin secretion in a gut-brain axis.