Islet transplantation is a potential treatment for type 1 diabetes, but the shortage of donor organs limits its routine application. As potential donor animals, we generated transgenic pigs expressing LEA29Y, a high-affinity variant of the T-cell costimulation inhibitor CTLA-4Ig, under the control of the porcine insulin gene promoter. Neonatal islet cell clusters (ICCs) from INSLEA29Y transgenic (LEA-tg) pigs and wild-type controls were transplanted into streptozotocin-induced hyperglycemic NOD-scid IL2Rγ(null) mice. Cloned LEA-tg pigs are healthy and exhibit a strong β-cell-specific transgene expression. LEA-tg ICCs displayed the same potential to normalize glucose homeostasis as wild-type ICCs after transplantation. After adoptive transfer of human peripheral blood mononuclear cells, transplanted LEA-tg ICCs were completely protected from rejection, whereas reoccurrence of hyperglycemia was observed in 80% of mice transplanted with wild-type ICCs. In the current study, we provide the first proof-of-principle report on transgenic pigs with β-cell-specific expression of LEA29Y and their successful application as donors in a xenotransplantation model. This approach may represent a major step toward the development of a novel strategy for pig-to-human islet transplantation without side effects of systemic immunosuppression.