Islet transplantation for type 1 diabetes is limited by a shortage of donor islets and requirement for immunosuppression. We approached this problem by inducing in vivo islet neogenesis in non-obese diabetic (NOD) diabetic mice, a model of autoimmune diabetes. We demonstrate that gene therapy with helper-dependent adenovirus carrying neurogenin3 (Ngn3), an islet lineage-defining transcription factor, and betacellulin (Btc), an islet growth factor, leads to the induction of periportal insulin-positive cell clusters in the liver, which are rapidly destroyed. To specifically accord protection to these 'neo-islets' from cytokine-mediated destruction, we overexpressed suppressor of cytokine signaling 1 (SOCS1) gene, using a rat insulin promoter in combination with Ngn3 and Btc. With this approach, about half of diabetic mice attained euglycemia sustained for over 4 months, regain glucose tolerance and appropriate glucose-stimulated insulin secretion. Histological analysis revealed periportal islet hormone-expressing 'neo-islets' in treated mouse livers. Despite evidence of persistent 'insulitis' with activated T cells, these 'neo-islets' persist to maintain euglycemia. This therapy does not affect diabetogenicity of splenocytes, as they retain the ability to transfer diabetes. This study thus provides a proof-of-concept for engineering in vivo islet neogenesis with targeted resistance to cytokine-mediated destruction to provide a long-term reversal of diabetes in NOD mice.