Transplantation of pancreatic islets as a therapy for insulin-dependent diabetes mellitus is hampered by the vulnerability of islet allografts to immunologic rejection and recurrent anti-beta cell autoimmunity. We present experimental evidence that pancreatic islet allografts transplanted into the thymus of chemically' as well as spontaneously diabetic rats can effectively restore physiologic regulation of blood glucose metabolism and are protected from rejection and autoimmune recurrence. Moreover, we demonstrate that long-term residence of islet allografts in the thymus induces an unresponsive state which permits survival of subsequent donor-strain islets transplanted to an extrathymic site. This effect may result from specific modulation of donor-reactive T-cell precursors maturing in the islet-bearing thymus.