The onset hyperglycemia in NOD mice coincides with loss of a critical portion of the islet cell mass. Thus, restoration of a portion of the lost islet cell mass should be sufficient to create euglycemia if a deficit in insulin producing tissue is the sole cause of disease. It is notable that many potent T-cell tolerizing therapies have failed to enable restoration of euglycemia in new onset T1D NOD mice with or without transplantation of islets. Hence, we have searched for other potentially complicating features, e.g. insulin resistance, that may serve as an additional barrier to restoration of euglycemia. We now report that new onset T1D is associated with inflammation induced insulin resistance created by faulty phosphorylation of crucial elements of the insulin signaling pathway (insulin receptor and IRS-1). To test the hypotheses that inflammation, insulin resistance and T1DM disease expression are linked we have tested the effects of select anti-inflammatory agents in T1DM NOD mice. We now report that treatment for 15 days with alpha-1-antitrypsin (AAT) or 20 days with anti-TNF-a (i) permanently restores a euglycemic state in 14 of 16 or 22 of 24 treated new onset diabetic NOD mice (ii) ablated insulin resistance and (iii) produces specific tolerance to syngeneic, not acceptance of allogeneic, islets that is manifest long after cessation of treatment of new onset diabetic NODs while preserving other immune responses. In short, the restoration of euglycemia, self-tolerance, and of the faulty insulin receptors and IRS- 1 phosphorylation patterns can be corrected by treatment with ATT, an acute phase reactant with potent anti-inflammatory activity, and/or anti-TNF-a.