Human insulin-like growth factor 1(hIGF-1) is essential for cell proliferation and used therapeutically in treating various diseases including diabetes mellitus. Here, we present that a recombinant hIGF-1(rhIGF-1) was expressed fused with the C-terminus of a rice luminal binding protein and accumulated highly in rice seeds, reaching 6.8+/-0.5% of total seed protein. The rhIGF-1 fusion was demonstrated to possess biological activity to stimulate cell proliferation. Importantly, the unprocessed transgenic seeds could significantly increase plasma rhIGF-1 level and reduce blood glucose of diabetic mice via oral delivery. Further studies suggested that transgenic seeds reduced blood glucose of diabetic mice by enhancing islet cells survival and increasing insulin secretion rather than increasing insulin sensitivity. These results indicated the potential of the novel fusion expression system in production and oral delivery of biologically active small peptides for diseases.