Background. Transplantation of human islets has been successful clinically. Since human islets are scarce, we are studying microencapsulated porcine islet xenografts in nonobese diabetic (NOD) mice. We have evaluated the cellular immune response in NOD mice with and without dual costimulatory blockade. Methods. Alginate-poly-L-lysine-encapsulated adult porcine islets were transplanted i.p. in untreated diabetic NODs and NODs treated with CTLA4-Ig to block CD28/B7 and with anti-CD 154 mAb to inhibit CD40/CD40-ligand interactions. Groups of mice were sacrificed on subsequent days; microcapsules were evaluated by histology; peritoneal cells were analyzed by FACS; and peritoneal cytokines were quantified by ELISA. Controls included immunoincompetent NOD-Scids and diabetic NODs given sham surgery or empty microcapsules. Results. Within 20 days, encapsulated porcine islets induced accumulation of large numbers of macrophages, eosinophils, and significant numbers of CD4+ and CD8+ T cells at the graft site, and all grafts were rejected. During rejection, IFNγ, IL-12 and IL-5 were significantly elevated over sham-operated controls, whereas IL-2, TNFα, IL-4, IL-6, IL-10, IL-1β and TGFβ were unchanged. Treatment with CTLA4-Ig and anti-CD154 prevented graft destruction in all animals during the 26 days of the experiment, dramatically inhibited recruitment of host inflammatory cells, and inhibited peritoneal IFNγ and IL-5 concentrations while delaying IL-12 production. Conclusions. When two different pathways of T cell costimulation were blocked, T cell-dependent inflammatory responses were inhibited, and survival of encapsulated islet xenografts was significantly prolonged. These findings suggest synergy between encapsulation of donor islets and simultaneous blockade of two host costimulatory pathways in prolonging xenoislet transplant survival.