Type 1 diabetes (T1D) is characterized by the destruction of the insulin-producing β-cells of pancreatic islets. Genetic and environmental factors both contribute to T1D development. Viral infection with enteroviruses is a suspected trigger for T1D, but a causal role remains unproven and controversial. Studies in animals are problematic because of species-specific differences in host cell susceptibility and immune responses to candidate viral pathogens such as coxsackievirus B (CVB). In order to resolve the controversial role of viruses in human T1D, we developed a viral infection model in immunodeficient mice bearing human islet grafts. Hyperglycemia was induced in mice by specific ablation of native β-cells. Human islets, which are naturally susceptible to CVB infection, were transplanted to restore normoglycemia. Transplanted mice were infected with CVB4 and monitored for hyperglycemia. Forty-seven percent of CVB4-infected mice developed hyperglycemia. Human islet grafts from infected mice contained viral RNA, expressed viral protein, and had reduced insulin levels compared with grafts from uninfected mice. Human-specific gene expression profiles in grafts from infected mice revealed the induction of multiple interferon-stimulated genes. Thus, human islets can become severely dysfunctional with diminished insulin production after CVB infection of β-cells, resulting in diabetes.