In a companion article, we describe the engineering and characterization of pituitary GH3 cell clones stably transfected with a furin-cleavable human insulin cDNA (InsGH3 cells). This article describes the performance of InsGH3 (clones 1 and 7) cell grafts into streptozotocin (STZ)-induced diabetic nude mice. Subcutaneous implantation of 2 × 10⁶ InsGH3 cells resulted in the progressive reversal of hyperglycemia and diabetic symptoms, even though the progressive growth of the transplanted cells (clone 7) eventually led to glycemic levels below the normal mouse range. Proinsulin transgene expression was maintained in harvested InsGH3 grafts that, conversely, lose the expression of the prolactin (PRL) gene. Elevated concentrations of circulating mature human insulin were detected in graft recipients, demonstrating that proinsulin processing by InsGH3 cells did occur in vivo. Histologic analysis showed that transplanted InsGH3 grew in forms of encapsulated tumors composed of cells with small cytoplasms weakly stained for the presence of insulin. Conversely, intense insulin immunoreactivity was detected in graft-draining venules. Compared to pancreatic βTC3 cells, InsGH3 cells showed in vitro a higher rate of replication, an elevate resistance to apoptosis induced by serum deprivation and proinflammatory cytokines, and significantly higher antiapoptotic Bcl-2 protein levels. Moreover, InsGH3 cells were resistant to the streptozotocin toxicity that, in contrast, reduced βTC3 cell viability to 50–60% of controls. In conclusion, proinsulin gene expression and mature insulin secretion persisted in transplanted InsGH3 cells that reversed hyperglycemia in vivo. InsGH3 cells might represent a potential β-cell surrogate because they are more resistant than pancreatic β cells to different apoptotic insults and might therefore be particularly suitable for encapsulation.