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Bone marrow-derived mesenchymal stem cells (MSCs) are known to produce vascular endothelial growth factor. We hypothesize that co-transplantation of MSCs and islets promotes revascularization and improves islet graft function.Lewis rat islets were infused into the liver of streptozotocin-diabetic syngeneic recipients or transplanted under the renal capsule of nonobese diabetic severe combined immunodeficiency (NOD SCID) mice with MSCs isolated from Lewis bone marrow and expanded in culture.Co-transplantation of 500 islets and 107 MSCs (islet-MSCs) reversed diabetes in all eight recipients, whereas islet-alone transplantation achieved euglycemia in 3 of 10 recipients. With 300 islets, five of nine islet-MSCs and 1 of 10 islets-alone recipients reversed diabetes. Results of intravenous glucose tolerance tests performed on day 56 were significantly better in islet-MSCs than islet-alone recipients. One week after transplantation, well-preserved islet structure and higher number of capillaries were found in the liver of islet-MSCs recipients, whereas islet-alone grafts were fragmented with very few capillaries. Islets showed a similar morphology when transplanted with MSCs in nonobese diabetic severe combined immunodeficiency mice with a significantly higher capillary per β-cell ratio than that in islet-alone grafts (0.135±0.046 vs. 0.052±0.028 capillary segments per β-cell, P<0.01). One week after transplantation, islets were surrounded by MSCs labeled with carboxyfluorescein succinimidyl ester or Qdot nanocrystals, and some labeled MSCs positively stained for vascular endothelial growth factor or von Willebrand factor.Our results demonstrate the improvement of islet graft morphology and function by co-transplantation with MSCs. This improvement is attributable, at least in part, to the promotion of graft revascularization mediated by MSCs.