Type 1 diabetes results from T cell-mediated destruction of insulin-producing beta cells. Although elimination of B lymphocytes has proven successful at preventing disease, modulation of B cell function as a means to prevent type 1 diabetes has not been investigated. The development, fate, and function of B lymphocytes depend upon BCR signaling, which is mediated in part by Bruton's tyrosine kinase (BTK). When introduced into NOD mice, btk deficiency only modestly reduces B cell numbers, but dramatically protects against diabetes. In NOD, btk deficiency mirrors changes in B cell subsets seen in other strains, but also improves B cell-related tolerance, as indicated by failure to generate insulin autoantibodies. Introduction of an anti-insulin BCR H chain transgene restores diabetes in btk-deficient NOD mice, indicating that btk-deficient B cells are functionally capable of promoting autoimmune diabetes if they have a critical autoimmune specificity. This suggests that the disease-protective effect of btk deficiency may reflect a lack of autoreactive specificities in the B cell repertoire. Thus, signaling via BTK can be modulated to improve B cell tolerance, and prevent T cell-mediated autoimmune diabetes.