In type 1 diabetes, T cell-mediated death of pancreatic beta cells produces insulin deficiency. However, what attracts or restricts broadly autoreactive lymphocyte pools to the pancreas remains unclear. We report that TRPV1(+) pancreatic sensory neurons control islet inflammation and insulin resistance. Eliminating these neurons in diabetes-prone NOD mice prevents insulitis and diabetes, despite systemic persistence of pathogenic T cell pools. Insulin resistance and beta cell stress of prediabetic NOD mice are prevented when TRPV1(+) neurons are eliminated. TRPV1(NOD), localized to the Idd4.1 diabetes-risk locus, is a hypofunctional mutant, mediating depressed neurogenic inflammation. Delivering the neuropeptide substance P by intra-arterial injection into the NOD pancreas reverses abnormal insulin resistance, insulitis, and diabetes for weeks. Concordantly, insulin sensitivity is enhanced in trpv1(-/-) mice, whereas insulitis/diabetes-resistant NODxB6Idd4-congenic mice, carrying wild-type TRPV1, show restored TRPV1 function and insulin sensitivity. Our data uncover a fundamental role for insulin-responsive TRPV1(+) sensory neurons in beta cell function and diabetes pathoetiology.