: Two major hurdles must be overcome to cure type 1 diabetes (T1D): (i) the autoimmune response and (ii) destruction of insulin-secreting islets/β cells. Immunotherapies, including improved immune regulation using ex vivo expanded regulatory T-cell (Tregs) or low-dose interleukin-2 (IL-2), may be able to suppress autoimmunity. However, immunomodulation is not expected to directly stimulate regeneration of β cells. On the other hand, mesenchymal stromal/stem cells (MSCs) possess both immunomodulatory and regenerative properties and represent a promising new intervention for autoimmune diseases. MSCs are an accepted therapeutic for wound healing in plastic surgery applications and are being tested in clinical trials for the treatment of autoimmune and inflammatory diseases, ischemia reperfusion injuries, diabetes and other diseases. Our group and others found that after infusion into spontaneous non-obese diabetic (NOD) mice, MSCs migrated into the injured pancreas, reduced hyperglycemia and attenuated Th1 immune responses concomitant with the expansion/proliferation of Tregs. Most importantly, MSC infusion led to increased mRNA expression of IL-2 and TGF-β receptors in pancreatic Treg cells in NOD mice. A pilot clinical trial in Sweden showed that a single infusion of autologous bone marrow-derived MSCs preserved insulin secretion in adult patients with new-onset T1D. This study has yet to be systemically tested in patients in the United States and no mechanistic studies have been reported that explain the benefit observed. MSCs derived from umbilical cord (UC-MSCs) show greater cell yield, a less invasive harvesting procedure with associated reduced morbidity, and stronger immunosuppressive and regenerative potential and are a popular source for cell therapy. Based on the above principles and the successful patient enrollment in our one-year R01 grant, we propose a renewal of a randomized, double-blind, placebo- controlled, single-center clinical trial to determine the efficacy of UC-MSC therapy in patients with new-onset T1D. Our working hypothesis is that systemic administration of MSCs freshly expanded ex vivo reduces progression of diabetes and preserves insulin secretion through restoring normal function of the immune system and preservation/improvement of pancreatic β cells in patients with T1D. We will test this hypothesis by the following aims: (i). Determine the safety and efficacy of MSC therapy in patients with new-onset T1D when added to standard-of-care, and (ii) Define the mechanisms of protection and elucidate biomarker(s) of efficacy of MSC therapy in T1D patients. The early safety of MSC therapy is documented in our first 7 adult patients age 18-30 enrolled over 7 months and from multiple MSC Trials for various diseases. MSCs may constitute an important therapeutic advancement for T1D.