To analyse the effects of TGF-beta in insulin dependent diabetes mellitus (IDDM), we have developed non-obese diabetic (NOD) transgenic mice expressing TGF-beta under the control of the rat insulin II promoter. Pancreata of TGF-beta transgenic mice were roughly one twentieth of the size of pancreata of wild-type NOD mice and showed small clusters of micro-islets rather than normal adult islets. However, these islets produced sufficient levels of insulin to maintain normal glucose levels and mice were protected from the diabetes, which developed in their negative littermates. A massive fibrosis was seen in the transgenic pancreata that was accompanied with infiltration of mononuclear cells that decreased with age. Interestingly, these mice showed normal anti-islet immune response in their spleens and remained susceptible to adoptive transfer of IDDM by mature cloned CD8 effector cells. TUNEL assays revealed increased apoptosis of invading cells when compared to non-transgenic NOD mice. Taken together, these results suggest that TGF-beta protects islets by a local event.