The NOD mouse is an animal model for insulin-dependent diabetes with many similarities to the human disease. NOD mice which are transgenic for the Ea gene, allowing expression of the E molecule, are protected from diabetes and rarely develop insulitis. We have constructed bone marrow chimeras between transgenic and non-transgenic NOD mice to study the correlation of E expression on bone marrow derived cells and thymic epithelium vs the production of IL-4 and IFN-γ. We show that NOD-E→NOD-E and NOD-E→NOD chimeras have elevated levels of IL-4 compared to NOD→NOD and NOD→NOD-E chimeras in the thymus. However, in the periphery the protected NOD-E→NOD-E show much higher IL-4 levels than any of the other chimeras. This drop in peripheral IL-4 production seen in NOD-E→NOD, NOD→NOD-E and NOD→NOD chimeras correlates with the increased insulitis seen in these mice compared to NOD-E→NOD-E. In contrast, there were no differences in IFN-γ production between the chimeras. We suggest that the precommitted, regulatory T cells, selected in an E-expressing thymic environment, need continuous interaction with E-expressing primary antigen presenting cells in the periphery for optimal IL-4 production. Decrease in IL-4 production correlates with increased insulitis.