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Context: Islet transplantation can improve metabolic control for type 1 diabetes (T1D), an effect anticipated to improve insulin sensitivity. However, current immunosuppression regimens containing tacrolimus and sirolimus have been shown to induce insulin resistance in rodents. Objective: The objective of the study was to evaluate the effect of islet transplantation on insulin sensitivity in T1D using euglycemic clamps with the isotopic dilution method to distinguish between effects at the liver and skeletal muscle. Design, Setting, and Participants: Twelve T1D subjects underwent evaluation in the Clinical and Translational Research Center before and between 6 and 7 months after the transplant and were compared with normal control subjects. Intervention: The intervention included intrahepatic islet transplantation according to a Clinical Islet Transplantation Consortium protocol under low-dose tacrolimus and sirolimus immunosuppression. Main Outcome Measures: Total body (M/Δinsulin), hepatic (1/endogenous glucose production ·basal insulin) and peripheral [(Rd − endogenous glucose production)/Δinsulin] insulin sensitivity assessed by hyperinsulinemic (1 mU·kg−1·min−1) euglycemic (∼90 mg/dL) clamps with 6,6-2H2-glucose tracer infusion were measured. Results: Glycosylated hemoglobin was reduced in the transplant recipients from 7.0% ± 0.3% to 5.6% ± 0.1% (P < .01). There were increases in total (0.11 ± 0.01 to 0.15 ± 0.02 dL/min·kg per microunit per milliliter), hepatic [2.3 ± 0.1 to 3.7 ± 0.4 × 102 ([milligrams per kilogram per minute]−1·(microunits per milliliter)−1)], and peripheral (0.08 ± 0.01 to 0.12 ± 0.02 dL/min·kg per microunit per milliliter) insulin sensitivity from before to after transplantation (P < .05 for all). All insulin sensitivity measures were less than normal in T1D before (P ≤ .05) and not different from normal after transplantation. Conclusions: Islet transplantation results in improved insulin sensitivity mediated by effects at both the liver and skeletal muscle. Modern dosing of glucocorticoid-free immunosuppression with low-dose tacrolimus and sirolimus does not induce insulin resistance in this population.