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In an effort to create a model of in vivo production of immunosuppressants, we have transfected C2C12 muscle cells (H-2k) with the cDNA for CTLA4Ig, a fusion protein that prevents the activation of T cells by blocking the costimulatory signal transduced by the T cell receptors CD28 and CTLA4. CTLA4Ig-secreting clones were cotransplanted with islets as composite grafts in the renal subcapsular space of diabetic mice. When the myoblasts were syngeneic to C3H/HeJ hosts (H-2k), there was a significant prolongation of survival of allogeneic C57Bl/6J (H-2b) islets from a mean 11.0 days to 31.7 days. When the graft was completely allogeneic (H-2k myoblasts and islets into H-2b recipients), there was no benefit in survival. A transient blockade of LFA-1 with the mAb M17 was synergistic in this combination: 8 out of 12 C57Bl/6J recipients achieved long-term acceptance. Systemic CTLA4Ig levels were detected up to 60 days after transplantation. In conclusion, we have shown that C2C12 muscle cells can be genetically engineered to secrete functional CTLA4Ig and that they can be used as a gene reservoir for the continuous in vivo production of CTLA4Ig to modulate the survival of islet cell allografts.