Progressive destruction of pancreatic islet beta-cells by immune cells is the primary feature of type 1 diabetes (T1D) and therapies that can restore the functional beta-cell mass are needed to alleviate disease progression. Here, we report the use of mesenchymal stromal/stem cells (MSCs) for the production and delivery of Gastrin, a peptide-hormone which is produced by intestinal cells and fetal islets and can increase beta-Cell mass, to promote protection from T1D. A single injection of syngeneic MSCs that were engineered to express Gastrin (Gastrin-MSCs) caused a profound delay in hyperglycemia in non-obese diabetic (NOD) mice compared to engineered control-MSCs. Similar treatment of early-hyperglycemic mice caused restoration of euglycemia for a significant duration, and these therapeutic effects were associated with protection of, and/or increase in, insulin producing islets and less severe insulitis. While the overall immune cell phenotype was not affected profoundly, pancreatic lymph node cells from Gastrin-MSC treated mice, upon ex vivo challenge with self-antigen, showed a Th2 and Th17 bias, and diminished the diabetogenic property in NOD-Rag1 deficient mice suggesting a disease protective immune modulation upon Gastrin-MSC treatment. Overall, this study shows the potential of production and delivery of Gastrin in vivo, by MSCs, in protecting insulin producing beta-cells and ameliorating the disease progression in T1D.