Isologous pancreatic islets were implanted into the portal vein of rats with streptozotocin-induced diabetes. At intervals of from one to 32 days after transplantation, the intrahepatic islet grafts were examined histologically and ultrastructurally, and their vascular supply was determined by later perfusion studies. Implanted islets were found widely dispersed throughout the liver in peripheral interlobular portal venules and surrounded by vacuolated liver cells containing large stores of glycogen. The endocrine cells were structurally normal in each interval examined. By the third day after transplantation the beta cells were depleted of secretory granules in aldehyde-fuchsin preparations. Regranulation returned by the 14th day and was associated with secretory organelle hypertrophy and hyperplasia. Islet cells were found outside the portal areas in direct apposition to hepatocytes forming distinct desmosomes by the first day. While hemoperfusion of the grafts occurred from the moment of implantation into the portal venule, a dual vascular supply derived from periportal arterial and venous sources developed by the 11th day after transplantation, establishing full vascularization of the grafts. Preliminary work is presented to show that an active ingrowth of nerves in the islet graft occurs in association with the process of vascularization.