Allogeneic islet transplantation is a promising experimental therapy for poorly controlled diabetes. Despite pharmacological immunosuppression, long-term islet engraftment remains elusive. Here, we designed a synthetic fusion transgene coupling PD-L1 and indoleamine dioxygenase [hereafter PIDO] whose constitutive expression prevents immune destruction of genetically engineered islet allograft transplanted in immunocompetent mice. PIDO expressing murine islets maintain robust dynamic insulin secretion in vitro and when transplanted in allogeneic hyperglycemic murine recipients reverse pre-existing streptozotocin-induced and autoimmune diabetes in the absence of pharmacological immunosuppression for more than 50 and 8 weeks, respectively, and is dependent on host CD4 competence. Additionally, PIDO expression in allografts preserves endocrine functional viability of islets and promotes a localized tolerogenic milieu characterized by the suppression of host CD8 T cell and phagocyte recruitment and accumulation of FOXP3 Tregs. Furthermore, in the canine model of xenogeneic islet transplantation, muscle implanted PIDO-expressing porcine islets displayed physiological glucose-responsive insulin secretion competency in euglycemic recipient for up to 20 weeks. In conclusion, the PIDO transgenic technology enables host CD4 T cell-modulated immune evasiveness and long-term functional viability of islet allo- and xenografts in immune-competent recipients without the need for pharmacological immune suppression and would allow for improved outcomes for tissue transplantation.