Recent studies have shown that type 1 diabetes can be reversed in a murine model by islet transplantation to a vascularized tissue engineering chamber. In preliminary experiments using a prevascularized chamber we observed that islet grafts not functioning initially can show a delayed onset of function several weeks after implantation. We sought to characterize this phenomenon. Islets were transplanted into prevascularized tissue engineering chambers based on the epigastric vessels in streptozotocin induced diabetic C57BL/6J mice. Animals were transplanted with 500 islets and observed at 1, 4, 8 and 16 weeks post transplantation. Weekly blood glucose (BG) measurements revealed an average onset of maintained graft function 6.8 weeks post transplantation. Graft function was proven by a return to a diabetic state following chamber removal. Mature grafts showed islet tissue clustered together within the tissue construct. The quantity of endocrine tissue staining positive for insulin correlated with graft function at 8 and 16 weeks. However, at 1 and 4 weeks, islet tissue was not evidently visible as observed by endocrine staining. All islet tissue showed dense vascularization and sporadic sympathetic innervation, irrespective of the graft's function. Immunopositive cells for Cytokeratin-7 and -19 were observed in the grafts at early time points and hormone producing cells appear to have been differentiated from these progenitors. Our data demonstrates that pancreatic duct-derived progenitors remain viable in vivo and eventually differentiate and mature to functional islets following transplantation. Our prevascularized tissue-engineering chamber in the groin supports maturation and function of the grafted tissue by two months after implantation.