Epigenetic modifiers are an emerging class of anti-tumor drugs, potent in multiple cancer contexts. Their effect on spontaneously developing autoimmune diseases has been little explored. We report that a short treatment with I-BET151, a small-molecule inhibitor of a family of bromodomain-containing transcriptional regulators, irreversibly suppressed development of type-1 diabetes in NOD mice. The inhibitor could prevent or clear insulitis, but had minimal influence on the transcriptomes of infiltrating and circulating T cells. Rather, it induced pancreatic macrophages to adopt an anti-inflammatory phenotype, impacting the NF-κB pathway in particular. I-BET151 also elicited regeneration of islet β-cells, inducing proliferation and expression of genes encoding transcription factors key to β-cell differentiation/function. The effect on β cells did not require T cell infiltration of the islets. Thus, treatment with I-BET151 achieves a ‘combination therapy’ currently advocated by many diabetes investigators, operating by a novel mechanism that coincidentally dampens islet inflammation and enhances β-cell regeneration. DOI: http://dx.doi.org/10.7554/eLife.04631.001