Successful islet transplantation depends on the infusion of sufficiently large quantities of islets, but only a fraction of transplanted islets can survive and become engrafted, and yet the underlying mechanism remains unclear. In this study, we examined the effect of sirolimus, a key component of the immunosuppressive regimen in clinical islet transplantation, on islet engraftment and function. To distinguish the effect of sirolimus on immune rejection from its effect on islet engraftment, we used a syngeneic model. Diabetic mice were transplanted with 250 islets under the renal capsule, followed by treatment with sirolimus or vehicle for 14 days. Thirty days posttransplantation, islet grafts were retrieved for the determination of insulin content and vascular density. Compared with mock-treated controls, diabetic recipient mice receiving sirolimus exhibited impaired blood glucose profiles and reduced glucose-stimulated insulin secretion, correlating with reduced intragraft insulin content and decreased vascular density. Islets exposed to sirolimus for 24 h in culture displayed significantly diminished glucose-stimulated insulin release, coinciding with decreased pancreas duodenum homeobox-1 and GLUT2 expression in cultured islets. Furthermore, sirolimus-treated diabetic recipient mice, as opposed to mock-treated controls, were associated with dyslipidemia. These data suggest that sirolimus, administered in the early posttransplantation phase, is a confounding factor for reduced islet engraftment and impaired beta-cell function in transplants.