Abstract: Islet/b cell transplantation offers great hope for patients with type 1 diabetes. We assessed the mechanisms of how intrahepatic co-infusion of human alpha-1 antitrypsin (hAAT)-engineered mesenchymal stromal cells (hAAT-MSCs) improve survival of human islet grafts post-transplantation (PT). Longitudinal in vivo bioluminescence imaging studies identified significantly more islets in the livers bearing islets co-transplanted with hAAT-MSCs compared to islets transplanted alone. In vitro mechanistic studies revealed that hAAT-MSCs inhibit macrophage migration and suppress IFN-g-induced M1-like macrophages while promoting IL-4-induced M2-like macrophages. In vivo, this translated to significantly reduced CD11c+ and F4/80+ cells and increased CD206+ cells around islets co-transplanted with hAAT-MSCs as identified by multiplex immunofluorescence staining. Recipient-derived F4/80+and CD11b+ macrophages were mainly present in the periphery of an islet, while CD11c+ and CD206+ cells appeared inside an islet. hAAT-MSCs inhibited macrophage migration and skewed the M1-like phenotype toward an M2 phenotype both in vitro and in vivo, which may have favored islet survival. These data provide evidence that hAAT-MSCs co-transplanted with islets remain in the liver and shift macrophages to a protective state that favors islet survival. This novel strategy may be used to enhance b cell survival during islet/b cell transplantation for the treatment of type 1 diabetes or other diseases.