The effect of cyclosporin administered from 30 to 100 days of age on pancreatic events and the development of insulin-dependent diabetes has been studied by serial pancreatic biopsy of individual diabetes-prone BB/Edinburgh rats. Cyclosporin completely prevented the development of diabetes up to 150 days of age and reduced the incidence to 50% of controls at 452 days of age. Islet cell surface antibodies paralleled the development of diabetes. Insulin autoantibodies were unrelated to diabetes and not affected by cyclosporin. Immunohistochemical analysis of pancreatic biopsies from untreated control diabetes-prone rats with monoclonal antibodies specific for rat MHC molecules and T- and B-lymphocyte and macrophage subsets showed that the first abnormality seen in rats that subsequently developed diabetes was hyperexpression of MHC class I molecules on vascular endothelium and islet cells. This was followed by accumulation of ED1+ macrophages at perivascular and periductal sites adjacent to noninfiltrated islets. Increased expression of MHC class II molecules on vascular endothelial cells was also noted. Most cells infiltrating the islets initially were also ED1+ macrophages, followed by increasing numbers of other activated effector cells including helper and cytotoxic-suppressor T lymphocytes and natural killer cells. Obliteration of insulin-containing cells was associated with regression of the infiltrate. Treatment with cyclosporin had no effect on pancreatic hyperexpression of MHC class I molecules but markedly inhibited accumulation of ED1+ cells at extraislet sites, the subsequent recruitment of immune effector cells, and islet infiltration. This resulted in a delay of the onset of diabetes in some rats and prevention of diabetes in others.