Inhibition of the 26S proteasome reduces the severity of several immune-mediated diseases. Here, we report that the proteasome also regulates transfer-induced diabetes in nonobese mice. Treatment of recipient mice with the proteasome inhibitor N(alpha)-benzyloxycarbonyl-l-leucyl-l-leucyl-l-leucinal (MG132) resulted in a 76% reduction in transfer-induced diabetes. The closely related inhibitor carbobenzoxy-l-leucyl-l-leucinal that inhibits calpains but not the proteasome had no protective effect, suggesting that MG132 acted via inhibition of the proteasome. MG132 decreased proliferation of transferred T cells in the pancreatic lymph nodes in vivo and prevented their expansion in a dose-dependent manner in vitro, consistent with a direct effect by MG132 on the T cells. MG132 did not prevent migration of transferred T cells into the islets but reduced the number of mice with severe infiltration. We suggest that MG132 prevents transfer-induced diabetes by directly targeting the autoreactive T cells and lowering their diabetogenic potential.