βig-h3/TGF-βi is a secreted protein capable of binding to both extracellular matrix and cells. Human genetic studies recently revealed that in the tgfbi gene encoding for βig-h3, three single nucleotide polymorphisms were significantly associated with type 1 diabetes (T1D) risk. Pancreatic islets express βig-h3 in physiological conditions, but this expression is reduced in β-cell insult in T1D. Since the integrity of islets is destroyed by autoimmune T lymphocytes, we thought to investigate the impact of βig-h3 on T-cell activation. We show here that βig-h3 inhibits T-cell activation markers as well as cytotoxic molecule production as granzyme B and IFN-γ. Furthermore, βig-h3 inhibits early T-cell receptor signaling by repressing the activation of the early kinase protein Lck. Moreover, βig-h3–treated T cells are unable to induce T1D upon transfer in Rag2 knockout mice. Our study demonstrates for the first time that T-cell activation is modulated by βig-h3, an islet extracellular protein, in order to efficiently avoid autoimmune response.