The mechanisms that regulate pancreatic β cell mass are poorly understood. While autoimmune and pharmacological destruction of insulin-producing β cells is often irreversible, adult cell mass does fluctuate in response to physiological cues including pregnancy and insulin resistance. This plasticity points to the possibility of harnessing the regenerative capacity of the β cell to treat diabetes. We developed a transgenic mouse model to study the dynamics of β cell regeneration from a diabetic state. Following doxycycline administration, transgenic mice expressed diphtheria toxin in β cells, resulting in apoptosis of 70%-80% of β cells, destruction of islet architecture, and diabetes. Withdrawal of doxycycline resulted in a spontaneous normalization of blood glucose levels and islet architecture and a significant regeneration of β cell mass with no apparent toxicity of transient hyperglycemia. Lineage tracing analysis indicated that enhanced proliferation of surviving β cells played the major role in regeneration. Surprisingly, treatment with Sirolimus and Tacrolimus, immunosuppressants used in the Edmonton protocol for human islet transplantation, inhibited β cell regeneration and prevented the normalization of glucose homeostasis. These results suggest that regenerative therapy for type 1 diabetes may be achieved if autoimmunity is halted using regeneration-compatible drugs.