G protein-coupled receptor 40 (GPR40) is being recently considered to be a new potential drug target for the treatment of type 2 diabetes because of its role in the enhancement of free fatty acid-regulated glucose-stimulated insulin secretion in pancreatic β-cells. We initially identified benzyloxyphenylpropanoic acid (1b) (EC(50) = 510 nM), which was designed based on the structure of free fatty acids, as a promising lead compound with GPR40 agonist activity. Chemical modification of compound 1b led to the discovery of 3-{4-[(2',6'-dimethylbiphenyl-3-yl)methoxy]-2-fluorophenyl}propanoic acid (4p) as a potent GPR40 agonist (EC(50) = 5.7 nM). Compound 4p exhibited acceptable pharmacokinetic profiles and significant glucose-lowering effects during an oral glucose tolerance test in diabetic rats. Moreover, no hypoglycemic event was observed even after administration of a high dose of compound 4p to normal fasted rats. These pharmacological results suggest that GPR40 agonists might be novel glucose-dependent insulin secretagogues with little or no risk of hypoglycemia.