Genetically engineered pigs are a promising source for islet cell transplantation in type 1 diabetes, but the strong human anti-pig immune response prevents its successful clinical application. Here we studied the efficacy of neonatal porcine islet-like cell clusters (NPICCs) overexpressing LEA29Y, a high-affinity variant of the T cell co-stimulation inhibitor CTLA-4Ig, to engraft and restore normoglycemia after transplantation into streptozotocin-diabetic NOD-SCID IL2rγ-/- (NSG) mice stably reconstituted with a human immune system. Transplantation of INSLEA29Y expressing NPICCs resulted in development of normal glucose tolerance (70.4%) and long-term maintenance of normoglycemia without administration of immunosuppressive drugs. All animals transplanted with wild-type NPICCs remained diabetic. Immunohistological examinations revealed a strong peri- and intragraft infiltration of wild-type NPICCs with human CD45+ immune cells consisting of predominantly CD4+ and CD8+ lymphocytes and some CD68+ macrophages and FoxP3+ regulatory T cells. Significantly less infiltrating lymphocytes and only few macrophages were observed in animals transplanted with INSLEA29Y transgenic NPICCs. This is the first study providing evidence that beta cell-specific LEA29Y expression is effective for NPICC engraftment in the presence of a humanized immune system and it has a long-lasting protective effect on inhibition of human anti-pig xenoimmunity. Our findings may have important implications for the development of a low-toxic protocol for porcine islet transplantation in patients with type 1 diabetes.