Previously we have generated transgenic (Tg) mice developing severe diabetes early in life with a profound depletion of β-cells with β-cell-directed expression of inducible cAMP early repressor-Iγ. Only male mice continue to demonstrate hyperglycemia throughout life. To investigate this sexual dimorphism, we treated severely diabetic male Tg mice with orchiectomy (ORX) or 17β-estradiol (E2) pellet implantation alone or in combination with ORX and E2-implantation to change the circulating levels and patterns of the ratio of estradiol to androgens. In the Tg-ORX group, the blood-glucose levels decreased to a certain level within several weeks but never reached the female Tg-control level. In contrast, the Tg-ORX+E2 or Tg-E2 group showed a more rapid drop in blood glucose to the basal level with a substantial increase in β-cells, thus preventing the occurrence of severe diabetes in the male mice. The β-cells, not only within islet but also in and adjacent to ducts and scattered β-cell clusters, were strongly induced by 1 week after treatment, and the islet morphology dramatically changed. Enhanced β-cell induction in the ducts occurred concomitantly with markedly increased levels of pancreatic duodenal homeobox-1 and related transcription factors. The glucose-lowering and β-cell-increasing effects were independent of the age at which the treatment is started. These data provide evidence that the circulating level of E2 and the ratio of E2 to T greatly affect the blood glucose levels, the β-cell induction, and the islet morphology in diabetic male Tg mice. This novel mechanism offers great potential for developing strategies to increase the number of β-cells in vivo.