Islet transplantation is a promising treatment for human type 1 diabetes mellitus. Transplantation requires systemic immunosuppression, which has numerous deleterious side effects. Islet antigen-specific regulatory T cells (Tregs) have been shown to protect islet grafts from autoimmune destruction in the nonobese diabetic (NOD) model when co-localized in the kidney capsule. An extra-hepatic transplant site was established by transplanting islet-loaded microporous poly (lactide-co-glycolide) (PLG) scaffolds into abdominal fat. This study examined an autoimmune transplantation model and determined whether co-localized Tregs could protect islet grafts in an extra-hepatic and extra-renal transplant site. Normoglycemia was restored, and co-transplanted Tregs extended graft survival, including several instances of indefinite protection. Transplanted Tregs were replaced by recipient-derived Tregs over time, indicating that islet antigen-specific Tregs induce tolerance to islet grafts through host-derived Tregs. Thus, Tregs provided protection against a diverse repertoire of autoreactive T-cell-receptor specificities mediating diabetes in the NOD model, possibly through a phenomenon previously described as infectious tolerance. Interestingly, the infiltration by Tregs protected a second islet transplant, indicating systemic tolerance to islet antigens. In summary, PLG scaffolds can serve as an alternative delivery system for islet transplantation that allows for the co-localization of immunomodulatory cells within islet grafts and induces long-term graft survival in an autoimmune diabetes model. This method of co-localizing immunomodulatory cells with islets in a clinically translatable transplant site to affect the immune system on a local and systemic level has potential therapeutic implications for human islet transplantation.