Type 1 diabetes is an autoimmune disease caused by permanent destruction of insulin-producing pancreatic β cells and requires lifelong exogenous insulin therapy. Recently, islet transplantation has been developed, and although there have been significant advances, this approach is not widely used clinically due to the poor survival rate of the engrafted islets. We hypothesized that improving survival of engrafted islets through ex vivo genetic engineering could be a novel strategy for successful islet transplantation. We transduced islets with adenoviruses expressing betacellulin, an epidermal growth factor receptor ligand, which promotes β-cell growth and differentiation, and transplanted these islets under the renal capsule of streptozotocin-induced diabetic mice. Transplantation with betacellulin-transduced islets resulted in prolonged normoglycemia and improved glucose tolerance compared with those of control virus-transduced islets. In addition, increased microvascular density was evident in the implanted islets, concomitant with increased endothelial von Willebrand factor immunoreactivity. Finally, cultured islets transduced with betacellulin displayed increased proliferation, reduced apoptosis and enhanced glucose-stimulated insulin secretion in the presence of cytokines. These experiments suggest that transplantation with betacellulin-transduced islets extends islet survival and preserves functional islet mass, leading to a therapeutic benefit in type 1 diabetes.