Autoimmune destruction of pancreatic beta cells in type I, insulin-dependent diabetes mellitus (IDDM) results in the loss of endogenous insulin secretion, which is incompletely replaced by exogenous insulin administration. The functional restoration provided by allogeneic beta-cell transplantation is limited by adverse effects of immunosuppression. To pursue an insulin replacement therapy based on autologous, engineered human non-beta cells, we generated a retroviral vector encoding a genetically modified human proinsulin, cleavable to insulin in non-beta cells, and a human nonfunctional cell surface marker. Here we report that this vector efficiently transduced primary human cells, inducing the synthesis of a modified proinsulin that was processed and released as mature insulin. This retrovirally derived insulin displayed in vitro biological activity, specifically binding to and phosphorylation of the insulin receptor, comparable to human insulin. In vivo, the transplantation of insulin-producing fibroblasts reverted hyperglycemia in a murine model of diabetes, whereas proinsulin-producing cells were ineffective. These results support the possibility of developing insulin production machinery in human non-beta cells for gene therapy of IDDM.