Current interventions for arresting autoimmune diabetes have yet to strike the balance between sufficient efficacy, minimal side effects, and lack of generalized immunosuppression. Introduction of antigen via the gut represents an appealing method for induction of antigen-specific tolerance. Here, we developed a strategy for tolerance restoration using mucosal delivery in mice of biologically contained Lactococcus lactis genetically modified to secrete the whole proinsulin autoantigen along with the immunomodulatory cytokine IL-10. We show that combination therapy with low-dose systemic anti-CD3 stably reverted diabetes in NOD mice and increased frequencies of local Tregs, which not only accumulated in the pancreatic islets, but also suppressed immune response in an autoantigen-specific way. Cured mice remained responsive to disease-unrelated antigens, which argues against excessive immunosuppression. Application of this therapeutic tool achieved gut mucosal delivery of a diabetes-relevant autoantigen and a biologically active immunomodulatory cytokine, IL-10, and, when combined with a low dose of systemic anti-CD3, was well tolerated and induced autoantigen-specific long-term tolerance, allowing reversal of established autoimmune diabetes. Therefore, we believe this method could be an effective treatment strategy for type 1 diabetes in humans.