Immunomodulation is an essential consideration for cell replacement procedures. Unfortunately, lifelong exposure to nonspecific systemic immunosuppression results in immunodeficiency and has toxic effects on nonimmune cells. Here, we engineered hybrid spheroids of mesenchymal stem cells (MSCs) with rapamycin-releasing poly(lactic-co-glycolic acid) microparticles (RAP-MPs) to prevent immune rejection of islet xenografts in diabetic C57BL/6 mice. Hybrid spheroids were rapidly formed by incubating cell-particle mixture in methylcellulose solution while maintaining high cell viability. RAP-MPs were uniformly distributed in hybrid spheroids and sustainably released RAP for ~3 weeks. Locoregional transplantation of hybrid spheroids containing low doses of RAP-MPs (200- to 4000-ng RAP per recipient) significantly prolonged islet survival times and promoted the generation of regional regulatory T cells. Enhanced programmed death-ligand 1 expression by MSCs was found to be responsible for the immunomodulatory performance of hybrid spheroids. Our results suggest that these hybrid spheroids offer a promising platform for the efficient use of MSCs in the transplantation field.