Genetically engineered cells in pancreatic cell transplants could do away with daily insulin dose.
At least in the case of mice experiments, the transplanted cells lasted a few months before being rejected.
The researchers, from Albert Einstein College of Medicine of Yeshiva University engineered insulin-producing beta cells to include three genes from a virus capable of evading detection by the immune system.
Normally the transplanted cells are able to restore normal glucose control but are then destroyed by the body within a few days.
In diabetic mice injected with the modified cells, normal glucose control was achieved for up to three months.
Study leader Professor Harris Goldstein said: ''Clearly, the three proteins were not optimal, because ultimately the cells did get rejected.
''We are now looking at other viral genes that also contribute to immune suppression and are trying to identify the best gene combination to use.''
The ability to do transplants would potentially remove the need for daily insulin injections in type 1 diabetes.
Experts said the Gene Therapy study showed ''proof of concept'' but transplants remained a long way off.
Cell transplantation therapy is limited because the immunosuppressive drugs needed to prevent rejection have very toxic side-effects and leave patients vulnerable to infection.
In people with type 1 diabetes, the immune system mistakenly destroys the body's own pancreatic beta cells, which produce insulin.
Without insulin, glucose builds up in the blood and eventually leads to complications such as heart disease, kidney disease, blindness, and premature death.
Dr Iain Frame, director of research at Diabetes UK, said as the researchers said the results should be treated as a proof of concept rather than a breakthrough.
''The effect on the blood glucose levels of the mice was transient and, as admitted by the lead researcher, the transplanted cells were soon rejected.
''To say that the results of this study move us closer to a cure for type 1 diabetes would unnecessarily raise the expectations of people with the condition.''