Inflammatory insults following islet transplantation (ITx) hinders engraftment and long-term function of the transplanted (Tx) islets. Using a murine model of ITx, we determined the role of LMP-420, a novel TNF-α inhibitor, both individually and in combination with the immunosuppressant cyclosporine A (CSA) in islet engraftment and survival. Diabetic C57BL/6 mice were Tx with 500 BALB/c islets under the kidney capsule. Four cohorts were used: LMP-420 only, CSA only, combination of LMP-420 and CSA (LMP+CSA), and control (n = 12 per cohort). Serial monitoring of blood glucose levels revealed that LMP+CSA (35 ± 5 days) prolonged stable blood insulin levels compared to control (6 ± 4 days). Immunohistology demonstrated that coadministration (LMP+CSA) results in a significant decrease in CD8(+) T-cell infiltration (LMP+CSA: 31 ± 18 vs. control: 224 ± 51 cells, p < 0.001). Serum cytokine analysis revealed that LMP-420 administration resulted in an increase in the anti-inflammatory cytokine IL-10 (2.5-fold), and a decrease in TNF-α (threefold) with no change in IL-2. However, coadministration resulted in a marked decrease in both IL-2 and TNF-α (threefold) along with increase in IL-10 (threefold). Coadministration also demonstrated increase of antiapoptotic SOCS-1 and Mn-SOD expression and significant reduction of donor-specific antibodies (p < 0.005). In conclusion, LMP-420 administration with CSA results in the upregulation of anti-inflammatory and antiapoptotic mechanisms which facilitate islet allograft engraftment and survival.