Individual rat islets could be aggregated into single megaislets in vitro and the megaislets remained morphologically and functionally intact after a 7-day period of culture in the presence of 95% O2 and 5% CO2. Cultured rat megaislets transplanted beneath the renal capsule of diabetic mice produced normoglycemia in the recipients and the survival of the xenografts was markedly prolonged by the 7-day exposure of a high oxygen tension. A single injection of antilymphocyte sera to mouse and rat lymphocytes into the recipients receiving cultured megaislets did not produce a further increase in the percentage of survival of the grafts at 70 days after transplantation. Lymphoid aggregates were present around xenografts of cultured negaislets at 60 and 90 days after transplantation. This lymphoid reaction did not interfere with the function of the xenografts since the recipients were normoglycemic and removal of the grafts resulted in a rapid return to a diabetic state. Intraportal and intrasplenic transplants of cultured rat megaislets did not survive as long as the xenografts of megaislets transplanted beneath the renal capsule. The renal subcapsule site apparently provided some immunological advantage for delaying acute rejection since transplants of individual, fresh rat islets survived for twice as long under the renal capsule as compared wtih intraportal transplants of fresh rat islets.