β-Cell mass can expand in response to demand: during pregnancy, in the setting of insulin resistance, or after pancreatectomy. It is not known whether similar β-cell hyperplasia occurs following immune therapy of autoimmune diabetes, but the clinical remission soon after diagnosis and the results of recent immune therapy studies suggest that β-cell recovery is possible. We studied changes in β-cell replication, mass, and apoptosis in NOD mice during progression to overt diabetes and following immune therapy with anti-CD3 monoclonal antibodies (mAbs) or immune regulatory T-cells (Tregs). β-Cell replication increases in pre-diabetic mice, after adoptive transfer of diabetes with increasing islet inflammation but before an increase in blood glucose concentration or a significant decrease in β-cell mass. The pathogenic cells are responsible for increasing β-cell replication because replication was reduced during diabetes remission induced by anti-CD3 mAb or Tregs. β-Cell replication stimulated by the initial inflammatory infiltrate results in increased production of new β-cells after immune therapy and increased β-cell area, but the majority of this increased β-cell area represents regranulated β-cells rather than newly produced cells. We conclude that β-cell replication is closely linked to the islet inflammatory process. A significant proportion of degranulated β-cells remain, at the time of diagnosis of diabetes, that can recover after metabolic correction of hyperglycemia. Correction of the β-cell loss in type 1 diabetes will, therefore, require strategies that target both the immunologic and cellular mechanisms that destroy and maintain β-cell mass.