Stem cell research offers the promise of replacing missing or damaged tissues in the treatment of disease. Stem-cell-derived transplants still face problems with rejection as in traditional organ transplants. Several drugs can prevent rejection but also suppress the immune system, leaving patients vulnerable to infections and cancer. To avoid rejection without using drugs requires re-educating the immune system to “tolerate” the transplant and not see it as foreign. Because of its role in educating developing immune cells, the thymus is a critical organ in establishing what the immune system recognizes as “self” and not foreign, in a process known as immune tolerance. By growing a new thymus from stem cells matched to transplanted tissues, we can condition the immune system to be tolerant to the transplant and avoid chronic immunosuppression. We have developed a method to grow stem cells into thymic cells that become normal thymus tissue when grafted into mouse models. Notably, the new thymus can promote normal development of immune cells, indicating the potential for generating new, tolerant immune cells. We propose to induce immune tolerance to other stem-cell derived tissues using stem-cell-derived thymus tissue to engineer tolerance. We will optimize our methods of growing thymus tissue, which will be used to condition mice to accept stem-cell-derived pancreas grafts, testing their ability both to prevent rejection and to cure diabetes in a transplant model.