Oxidative stress produced during pancreatic islet isolation leads to significant β-cell damage. Homeostatic cytokines secreted subsequently to islet transplantation damage β-cells by generating oxygen free radicals. In this study, exendin-4, a glucagon-like peptide-1 analog improved islet transplantation outcome by increasing the survival of diabetic recipient mice from 58% to 100%. We hypothesized that this beneficial effect was due to the ability of exendin-4 to reduce oxidative stress. Further experiments showed that it significantly reduced the apoptotic rate of cultured β-cells subjected to hypoxia or to IL-1β. Reduction of apoptotic events was confirmed in pancreatic islet grafts of exendin-4-treated mice. Exendin-4 enhanced Akt phosphorylation of β-cells and insulin released from them. It even augmented insulin secretion from islets cultivated at hypoxic conditions. Exposure to hypoxia led to a decrease in the activation of Akt, which was reversed when β-cells were pretreated with exendin-4. Moreover, exendin-4 increased the activity of redox enzymes in a hypoxia-treated β-cell line and reduced reactive oxygen species production in isolated pancreatic islets. Recovery from diabetes in mice transplanted with hypoxic islets was more efficient when they received exendin-4. In conclusion, exendin-4 rescued islets from oxidative stress caused by hypoxia or due to cytokine exposure. It improved the outcome of syngenic and xenogenic islet transplantation.