Type 2 Diabetes Mellitus (T2DM) is a multifactorial metabolic disorder characterised by insulin resistance and defective insulin secretion. The lipid-activated novel protein kinase C isoform, PKCε, has been shown to play a key role in the progression of T2DM; chronic activation of PKCε from lipid oversupply drives insulin resistance and progression of diabetes through the phosphorylation of key proteins involved in insulin secretion and action. As the spatial regulation of PKCε activity has been linked to its interaction with the Receptor for Activated C Kinase 2 (RACK2, also known as COPB2), which is involved in the retrograde Golgi-ER transport of proteins, blockade of this interaction has potential therapeutic benefits for the treatment of diabetes. Using a proximity-based chemiluminescent assay to monitor the binding of lipid-activated PKCε to RACK2, we have discovered inhibitory peptides derived from the PKCε sequence. In particular, pentapeptides with a KxKxx motif and a C-terminal carboxylate potently inhibited this interaction, whereas other short sequences containing cationic residues were less effective. An alanine scan of one of the KxKxx peptides, KIKIC, showed that the two Lys residues and C-terminal carboxylate were the most important for inhibitory activity. A previously described PKC translocation inhibitor peptide, εV1-2, also derived from PKCε, exhibited much weaker inhibition of the PKCe-RACK2 interaction. The KIKIC peptide also exhibited moderate cell-penetrating ability when compared to HIV TAT and showed no evidence of cytotoxicity. Several proteins that were captured in a RACK2 pulldown of a liver lysate in a KIKIC-peptide sensitive manner were also identified as part of a PKC-RACK2 complex isolated from intact cells. These results highlight the potential of PKCε modulation through inhibition of its interactions with trafficking proteins, and provide a basis for the rational design of a new generation of peptides or peptidomimetics with potential for the prevention and/or treatment of T2DM.