Mesenchymal stem cells (MSCs) transplantation is a promising therapeutic strategy for type 1 diabetes (T1D). However, little is known on whether MSC transplantation can benefit T1D patients with ketoacidosis and its potential actions. Here, we show that infusion with bone marrow MSCs preserves β-cell function in some T1D patients with ketoacidosis by decreasing exogenous insulin requirement and increasing plasma C-peptide levels up to 1–2 years. MSC transplantation increased plasma and islet insulin contents in non-obese diabetic (NOD) mice with severe diabetes. In comparison with severe diabetes controls, MSC infusion reduced insulitis, decreased pancreatic TNF-α, and increased IL-10 and TGF-β1 expression in NOD mice. MSC infusion increased the percentages of splenic Tregs and levels of plasma IL-4, IL-10 and TGF-β1, but reduced the percentages of splenic CD8+ T and levels of plasma IFN-γ, TNF-α and IL-17A in NOD mice. Finally, infused MSCs predominantly accumulated in pancreatic tissues at 28 days post infusion. The effects of MSCs on preserving β-cell function and modulating inflammation tended to be dose-dependent and multiple doses of MSCs held longer effects in NOD mice. Hence, MSC transplantation preserved β-cell function in T1D patients and NOD mice with severe diabetes by enhancing Treg responses.