We have previously shown that co-transplantation of islets and Mesenchymal Stem Cells (MSCs) improves islet graft function and revascularisation, which was associated with the maintenance of normal islet morphology. The aim of the current study was to determine whether maintaining islet morphology in the absence of additional islet-helper cells would improve transplantation outcome in diabetic mice. Islets were isolated from C57BL/6 mice. Recipient streptozotocin-diabetic C57BL/6 mice were transplanted with a minimal mass of 150 islets as a single pellet or islets that were either manually dispersed or dispersed within a matrigel plug beneath the kidney capsule. Blood glucose concentrations were monitored for one month. Islet graft morphology and vascularisation were analysed by histology. Islets dispersed either alone or within matrigel plugs maintained near normal morphology, in contrast to pelleted islets, where individual islets fused to form large endocrine aggregates. The vascularisation of manually dispersed islets and islets dispersed within matrigel plugs was increased relative to respective control pelleted islet grafts. After one month 1/6 mice transplanted with pelleted islets cured compared to 5/6 mice transplanted with manually dispersed islets. The curative capacity of islets dispersed in matrigel was also better than that of pelleted islets (5/8 islet-matrigel implanted mice vs. 1/7 mice transplanted with pelleted islets cured by one month). Therefore, this study demonstrates that the maintenance of islet morphology is associated with improved graft function and revascularisation in diabetic mice.