Type 1 diabetes (T1D), characterized by permanent destruction of insulin-producing beta cells, is lethal unless conventional exogenous insulin therapy or whole-organ transplantation is employed. Although pancreatic islet transplantation is a safer and less invasive method compared with whole-organ transplant surgery, its treatment efficacy has been limited by islet graft malfunction and graft failure. Thus, ex vivo genetic engineering of beta cells is necessary to prolong islet graft survival. For this reason, a novel gene therapy approach involving adenovirus-mediated TRAIL gene delivery into pancreatic islets was tested to determine whether this approach would defy autoreactive T cell assault in streptozotocin (STZ)-induced diabetic rats. To test this, genetically modified rat pancreatic islets were transplanted under the kidney capsule of STZ-induced diabetic rats, and diabetic status (blood sugar and body weight) was monitored after islet transplantation. STZ-induced diabetic rats carrying Ad5hTRAIL-infected islets experienced prolonged normoglycemia compared with animals grafted with mock-infected or AdCMVLacZ-infected islets. In addition, severe insulitis was detected in animals transplanted with mock-infected or AdCMVLacZ-infected islets, whereas the severity of insulitis was reduced in animals engrafted with Ad5hTRAIL-infected islets. Thus, TRAIL overexpression in pancreatic islets extends allograft survival and function, leading to a therapeutic benefit in STZ-induced diabetic rats.