Intraportal islet transplantation has shown initial promise for the treatment of type 1 diabetes. However, the portal vein site is associated with complications such as thrombosis and hepatic steatosis, leading to transplant failure. The aims of this study were to (1) test the feasibility of an alternative islet transplantation method that utilises a FDA-approved gelatin sponge as a novel islet carrier and (2) assess if exogenous addition of nerve growth factor (NGF) has any additional beneficial effects on graft performance in diabetic mice. Mice were rendered diabetic by a single intraperitoneal injection of streptozotocin. Five hundred syngeneic islets were seeded onto a Gelitaspon((R)) disc in the presence or absence of NGF, and placed into a silicone chamber surrounding the femoral neurovascular pedicle. Islet function was assessed by weekly monitoring of blood glucose levels and an intraperitoneal glucose tolerance test performed at the end of the study. Chambers were harvested for further histological analysis. Four of five mice transplanted with islets seeded onto Gelitaspon with NGF showed a significant reduction in blood glucose levels by 4 weeks after transplantation, and demonstrated a response similar to non-diabetic mice when tested with an intraperitoneal glucose tolerance test. Chamber tissue from this group contained islets with insulin-producing beta cells adjacent to the vascular pedicle. Islets seeded onto Gelitaspon with NGF and sited on femoral vessels using a tissue-engineering chamber offer an alternative method for islet transplantation in diabetic mice. This may have potential as a method for clinical islet transplantation.