Pancreatic tissue fragments from neonatal inbred Lewis rats were distributed throughout the peritoneal cavities of isologous diabetic recipients receiving prednisolone on a schedule similar to that used in clinical transplantation beginning 9-44 days before transplantation. Plasma glucose levels in six of seven diabetic rats receiving prednisolone returned to normal levels 3 weeks after transplantation. Plasma insulin levels in the animals with successful transplants reached, at 1 week after transplantation, levels measured in normal control rats, but never attained the high insulin levels observed in the normal control animals receiving steroids. As with glucose the insulin levels remained in the normal range, and the animals steadily gained weight. During i.v. glucose tolerance tests (IVGTTs) in the rats with successful transplants at 4, 11-14, and 26-29 weeks after transplantation, the glucose levels were similar to those observed during IVGTTs in the control animals before and during corticosteroid therapy. In contrast, insulin levels during the IVGTTs were lower in the rats with successful transplants than in the control rats with or without steroids; however, insulin release during the IVGTTs was rapid in all animals, both with successful transplants and controls. These observations demonstrate that islet tissue implanted in the peritoneal cavities of diabetic rats receiving immunosuppressive chronic corticosteroid therapy can respond with a rapid and sufficient release of insulin to reverse diabetes as documented by normal glucose levels under stimulated and nonstimulated conditions.