In nonobese diabetic (NOD) mice, the autoimmune attack of the beta-cells in pancreatic islets is now believed to result from abnormal thymic selection. Accordingly, grafts of thymic epithelium from NOD donors to athymic recipients promote autoimmune islet inflammation in normal strains, and intrathymic islet grafts decrease the incidence of disease in NOD animals. Two competing hypotheses of abnormal thymic selection in diabetic mice have been proposed: deficient negative selection with poor elimination of aggressive organ-specific T cells vs. deficient positive selection of protective T regulatory cells. We have now addressed these alternatives by grafting, into young NOD mice whose own thymus was left intact, newborn NOD thymuses containing allogeneic pancreatic islets. If the NOD defect represented poor negative selection, these animals would develop disease at control rates, as the generation of autoreactive T cells proceeds undisturbed in the autologous thymus. In contrast, if NOD thymuses are defective in the production of T regulatory cells, lower disease incidence is expected in the chimeras, as more protective cells can be produced in the grafted thymus. The results show a reduced incidence of diabetes in the chimeras (24%) as compared with control (72%) NOD mice, throughout adult life. We conclude that amelioration of NOD mice by intrathymic islet grafts is not caused by enhanced negative selection and suggest that autoimmune diabetes in this system is the result of inefficient generation of T regulatory cells in the thymus.