To investigate whether the immunosuppressive neuropeptide calcitonin gene-related peptide (CGRP) was a potential candidate for tissue-specific gene therapy, we engineered nonobese diabetic (NOD) mice to produce CGRP in beta cells by placing the modified calcitonin gene under the control of the rat insulin promoter. CGRP inhibits CD4 T cell production of the cytokines that have been implicated in the pathogeny of type I diabetes. Three transgene-positive mouse lines were obtained, two of which expressed immunoreactive CGRP in beta cells (NOD-CGRP mice). Isolated islets from one of these two transgene-positive founders produced active CGRP, whereas islets from transgene-negative littermates did not. The production of CGRP by beta cells prevented insulin-dependent diabetes mellitus in male and reduced its incidence by 63% in female mice. This prevention was due to a local immunosuppressive effect of CGRP as no difference was detected between NOD-CGRP and NOD littermate lymph node, spleen, and thymus cells by either FACS analysis or proliferative response to stimulation by Ag, alloantigen or anti-CD3. These data suggest that CGRP is a potential therapeutic molecule to prevent or treat diabetes and possibly other diseases and conditions in which immune cells are involved. These data also suggest that endogenous CGRP concentrated in sensory nerve endings may regulate locally the immune response, further strengthening the importance of the functional neuroimmune link.