It is suggested that the maternal transmission of islet autoantibodies increases the risk of autoimmune diabetes in mice. The aim of this study was to determine whether fetal exposure to islet autoantibodies modified the risk of type 1 diabetes in humans. Islet autoantibodies were measured at birth in 720 offspring of mothers with type 1 diabetes. Offspring were prospectively followed for the development of multiple islet autoantibodies and diabetes. Offspring who were GAD or IA-2 autoantibody positive at birth (n = 678) had significantly lower risks for developing multiple islet autoantibodies (5-year risk 1.3%) and diabetes (8-year risk 1.1%) than offspring who were islet autoantibody negative at birth (5.3%, P = 0.008; and 3%, P = 0.04, respectively). Risk remained reduced after adjustment for birth weight, gestational age, or maternal diabetes duration (adjusted hazards ratio 0.25, P = 0.007 for multiple islet autoantibodies; 0.25, P = 0.04 for diabetes). Protection in offspring with islet autoantibodies at birth was most striking in offspring without the HLA DRB1*03/DRB1*04-DQB1*0302 genotype. Maternal transmission of antibodies to exogenous insulin did not affect diabetes risk in offspring. These findings suggest that fetal exposure to islet autoantibodies in children born to mothers with type 1 diabetes may be protective against future islet autoimmunity and diabetes.