The subcutaneous space is currently being pursued as an alternative transplant site for ß-cell replacement therapies due to its retrievability, minimally invasive procedure and potential for graft imaging. However, implantation of ß-cells into an unmodified subcutaneous niche fails to reverse diabetes due to a lack of adequate blood supply. Herein, poly (ε-caprolactone) (PCL) and poly (lactic-co-glycolic acid) (PLGA) polymers were used to make scaffolds and were functionalized with peptides (RGD (Arginine-glycine-aspartate), VEGF (Vascular endothelial growth factor), laminin) or gelatin to augment engraftment. PCL, PCL + RGD + VEGF (PCL + R + V), PCL + RGD + Laminin (PCL + R + L), PLGA and PLGA + Gelatin (PLGA + G) scaffolds were implanted into the subcutaneous space of immunodeficient Rag mice. After four weeks, neonatal porcine islets (NPIs) were transplanted within the lumen of the scaffolds or under the kidney capsule (KC). Graft function was evaluated by blood glucose, serum porcine insulin, glucose tolerance tests, graft cellular insulin content and histologically. PLGA and PLGA + G scaffold recipients achieved significantly superior euglycemia rates (86% and 100%, respectively) compared to PCL scaffold recipients (0% euglycemic) (* p < 0.05, ** p < 0.01, respectively). PLGA scaffolds exhibited superior glucose tolerance (* p < 0.05) and serum porcine insulin secretion (* p < 0.05) compared to PCL scaffolds. Functionalized PLGA + G scaffold recipients exhibited higher total cellular insulin contents compared to PLGA-only recipients (* p < 0.05). This study demonstrates that the bioabsorption of PLGA-based fibrous scaffolds is a key factor that facilitates the function of NPIs transplanted subcutaneously in diabetic mice.