Aims/hypothesis Hyperglycaemia can impair beta cell function after islet transplantation. Appropriate glucose-induced insulin secretion is dependent on a unique expression pattern of genes. Here we examined the effects of diabetes on gene expression in transplanted islets. Materials and methods Streptozotocin-induced diabetic or control non-diabetic Lewis rats were transplanted under the kidney capsule with an insufficient number (2,000) of syngeneic islets to normalise blood glucose levels in diabetic rats. Eighteen days after transplantation, islet grafts were retrieved and RT-PCR used to assess expression of selected genes critical for beta cell function. Islet grafts from diabetic rats transplanted with a sufficient number of islets (3,000) to normalise hyperglycaemia were used to assess the effects of correcting blood glucose levels. Additionally, gene expression of transplanted islets from non-diabetic rats was compared with freshly isolated islets.Results In islet grafts from diabetic rats, mRNA levels of several transcription factors important for the maintenance of beta cell differentiation were reduced (pancreatic and duodenal homeobox 1 [Iapp]). Conversely, mRNA levels of lactate dehydrogenase, which is normally suppressed in beta cells, were increased. The majority of the changes in gene expression were normalised after correction of hyperglycaemia, indicating that the severe loss of beta cell differentiation correlates with continuous exposure to diabetes. Even islet grafts from non-diabetic rats showed a few alterations in beta cell gene expression in comparison with fresh islets. Conclusions/interpretation Chronic hyperglycaemia contributes to the deterioration of beta cell differentiation after islet transplantation.