Islet allograft survival limits the long-term success of islet transplantation as a potential curative therapy for type 1 diabetes. A number of factors compromise islet survival, including recurrent diabetes. We investigated whether CD39, an ectonucleotidase that promotes the generation of extracellular adenosine, would mitigate diabetes in the T cell-mediated multiple low-dose streptozotocin (MLDS) model. Mice null for CD39 (CD39KO), wild-type mice (WT), and mice overexpressing CD39 (CD39TG) were subjected to MLDS. Adoptive transfer experiments were performed to delineate the efficacy of tissue-restricted overexpression of CD39. The role of adenosine signaling was examined using mutant mice and pharmacological inhibition. The susceptibility to MLDS-induced diabetes was influenced by the level of expression of CD39. CD39KO mice developed diabetes more rapidly and with higher frequency than WT mice. In contrast, CD39TG mice were protected. CD39 overexpression conferred protection through the activation of adenosine 2A receptor and adenosine 2B receptor. Adoptive transfer experiments indicated that tissue-restricted overexpression of CD39 conferred robust protection, suggesting that this may be a useful strategy to protect islet grafts from T cell-mediated injury.