Cell-based therapies offer considerable promise for prevention or cure of diabetes. We explored the potential of autologous, self-renewing, mesenchymal stem cells (MSC) as a clinically-applicable approach to promote glucose homeostasis. In vitro-expanded syngeneic bone marrow-derived MSC were administered following or prior to diabetes induction into a rat model of streptozotocin-induced beta cell injury. MSC were CD45(-)/CD44(+)/CD54(+)/CD90(+)/CD106(+). MSC spontaneously secreted IL-6, HGF, TGF-beta1 and expressed high levels of SDF-1 and low levels of VEGF, IL-1beta and PGE(2), but no EGF, insulin or glucagon. MSC homed to the pancreas and this therapy allowed for enhanced insulin secretion and sustained normoglycemia. Interestingly, immunohistochemistry demonstrated that, the islets from MSC-treated rats expressed high levels of PDX-1 and that these cells were also positive for insulin staining. In addition, peripheral T cells from MSC-treated rats exhibited a shift toward IL-10/IL-13 production and higher frequencies of CD4(+)/CD8(+) Foxp3(+) T cells compared to the PBS-treated rats. These data suggest that the bioactive factors secreted by MSC establish a tissue microenvironment that supports beta cell activation/survival in the pancreas. In addition, because of anti-inflammatory and immunoregulatory effects of MSC on T cells, this work can lead to clinical trial of autologous MSC to prevent/cure type-1 diabetes.