Inflammation of the exocrine pancreas accompanies autoimmune diabetes in mouse models and humans. However, the relationship between inflammation in the exocrine and endocrine (islet) compartments has not been explored. To address this issue, we used a transgenic mouse model in which autoimmune diabetes is acutely induced after the transfer of islet beta cell-specific transgenic T cells. Histological analyses demonstrated that inflammation of the exocrine pancreas, which was initially mild, resulted in the transient but widespread disruption of acinar tissue. Islet inflammation preceded exacerbated exocrine pathology, progressed to T cell-induced islet damage/destruction and persisted when exocrine inflammation subsided. Heparanase-1 (HPSE-1), an endoglycosidase that degrades heparan sulfate in basement membranes (BMs), when preferentially expressed in recipient cells but not donor (HPSE-1-deficient (HPSE-KO)) T cells, played a critical role in both exocrine and islet inflammation. In this context, HPSE-1 facilitates the passage of autoimmune T cells across the sub-endothelial basement membrane (BM) of pancreatic blood vessels and initially into the exocrine tissue. Peak exocrine inflammation that preceded or accompanied the acute onset of diabetes and HPSE-1 potentially contributed to acinar damage. In contrast to inflammation, HPSE-1 expressed by donor T cells played a key role in the induction of diabetes by allowing autoimmune T cells to traverse peri-islet BMs in order to destroy insulin-producing beta cells. Overall, our findings suggest that major exocrine pancreas injury is not required for the initiation of autoimmune islet damage and is not essential at the time of diabetes onset.