Safe induction of autoantigen-specific long-term tolerance is the “holy grail” for the treatment of autoimmune diseases. In animal models of type 1 diabetes, oral or i.n. immunization with islet antigens induces Tregs that are capable of bystander suppression. However, such interventions are only effective early in the prediabetic phase. Here, we demonstrate that a novel combination treatment with anti-CD3ε–specific antibody and i.n. proinsulin peptide can reverse recent-onset diabetes in 2 murine diabetes models with much higher efficacy than with monotherapy with anti-CD3 or antigen alone. In vivo, expansion of CD25⁺Foxp3⁺ and insulin-specific Tregs producing IL-10, TGF-β, and IL-4 was strongly enhanced. These cells could transfer dominant tolerance to immunocompetent recent-onset diabetic recipients and suppressed heterologous autoaggressive CD8 responses. Thus, combining a systemic immune modulator with antigen-specific Treg induction is more efficacious in reverting diabetes. Since Tregs act site-specifically, this strategy should also be expected to reduce the potential for systemic side effects.