In NOD (nonobese diabetic) mice, a model of autoimmune diabetes, various immunomodulatory interventions prevent progression to diabetes. However, after hyperglycemia is established, such interventions rarely alter the course of disease or allow sustained engraftment of islet transplants. A proteasome defect in lymphoid cells of NOD mice impairs the presentation of self antigens and increases the susceptibility of these cells to TNF-alpha-induced apoptosis. Here, we examine the hypothesis that induction of TNF-alpha expression combined with reeducation of newly emerging T cells with self antigens can interrupt autoimmunity. Hyperglycemic NOD mice were treated with CFA to induce TNF-alpha expression and were exposed to functional complexes of MHC class I molecules and antigenic peptides either by repeated injection of MHC class I matched splenocytes or by transplantation of islets from nonautoimmune donors. Hyperglycemia was controlled in animals injected with splenocytes by administration of insulin or, more effectively, by implantation of encapsulated islets. These interventions reversed the established beta cell-directed autoimmunity and restored endogenous pancreatic islet function to such an extent that normoglycemia was maintained in up to 75% of animals after discontinuation of treatment and removal of islet transplants. A therapy aimed at the selective elimination of autoreactive cells and the reeducation of T cells, when combined with control of glycemia, is thus able to effect an apparent cure of established type 1 diabetes in the NOD mouse.