The success rate of subcutaneous transplantation of pancreatic islets has been extremely low. Insufficient oxygen supply to the grafted islets is one possible major obstacle to the preservation of graft function. This study attempted to use basic fibroblast growth factor (bFGF) in subcutaneous transplantation to induce neovascularization and a sufficient blood flow around the space formed for grafted islets in the subcutaneous tissues. A bFGF-releasing device was designed enclosing bFGF in a polyethylene terephthalate mesh bag coated with polyvinylalcohol hydrogel. In the vascularized group (n = 5), two bFGF-releasing devices were implanted bilaterally into the subcutaneous tissue of the back of streptozotocin-induced diabetic Lewis rats. One week after implantation, isolated rat islets (5000) were syngeneically transplanted subcutaneously after the removal of the devices. In the control group (n = 5), no devices were implanted and the same number of rat islets was transplanted directly. One week after the implantation of the devices into the test animals, a thick, well-vascularized capsule was observed in the subcutaneous site. All vascularized recipient rats showed significant decreases in nonfasting blood glucose and maintained normoglycemia for more than 1 month after islet transplantation. However, in the control group, all rats failed to achieve normoglycemia after transplantation. This study provides evidence that the subcutaneous tissue is a promising site for pancreatic islet transplantation, offering convincing advantages in acceptability for diabetic recipients. Establishment of this subcutaneous islet transplantation technique will afford some new perspectives on successful clinical islet transplantation.