Lately, TNF alpha has been the focus of studies of autoimmunity; its role in the progression of autoimmune diabetes is, however, still unclear. To analyze the effects of TNF alpha in insulin-dependent diabetes mellitus (IDDM), we have generated nonobese diabetic (NOD) transgenic mice expressing TNF alpha under the control of the rat insulin II promoter (RIP). In transgenic mice, TNF alpha expression on the islets resulted in massive insulitis, composed of CD4+ T cells, CD8+ T cells, and B cells. Despite infiltration of considerable number of lymphoid cells in islets, expression of TNF alpha protected NOD mice from IDDM. To determine the mechanism of TNF alpha action, splenic cells from control NOD and RIP-TNF alpha mice were adoptively transferred to NOD-SCID recipients. In contrast to the induction of diabetes by splenic cells from control NOD mice, splenic cells from RIP-TNF alpha transgenic mice did not induce diabetes in NOD-SCID recipients. Diabetes was induced however, in the RIP-TNF alpha transgenic mice when CD8+ diabetogenic cloned T cells or splenic cells from diabetic NOD mice were adoptively transferred to these mice. Furthermore, expression of TNF alpha in islets also downregulated splenic cell responses to autoantigens. These data establish a mechanism of TNF alpha action and provide evidence that local expression of TNF alpha protects NOD mice from autoimmune diabetes by preventing the development of autoreactive islet-specific T cells.