Immunoregulatory and regenerative processes are activated in the pancreas during the development of type 1 diabetes (T1D) but are insufficient to prevent the disease. We hypothesized that the induction of cytoprotective heme oxygenase-1 (HO-1) by cobalt protophoryrin (CoPP) would prevent T1D by promoting anti-inflammatory and pro-repair processes. Diabetes-prone BioBreeding rats received ip CoPP or saline twice per week for 3 weeks, starting at 30 days and were monitored for T1D. Immunohistochemistry, confocal microscopy, quantitative RT-PCR, and microarrays were used to evaluate postinjection pancreatic changes at 51 days, when islet inflammation is first visible. T1D was prevented in CoPP-treated rats (29% vs 73%). Pancreatic Hmox1 was up-regulated along with islet-associated CD68+HO-1+cells, which were also observed in a striking peri-lobular interstitial infiltrate. Most interstitial cells expressed the mesenchymal marker vimentin and the hematopoietic marker CD34. Spindle-shaped, CD34+vimentin+ cells coexpressed collagen V, characteristic of fibrocytes. M2 macrophage factors Krüppel-like factor 4, CD163, and CD206 were expressed by interstitial cells, consistent with pancreatic upregulation of several M2-associated genes. CoPP upregulated islet-regenerating REG genes and increased neogenic REG3β+ and insulin+ clusters. Thus, short-term induction of HO-1 promoted a protective M2-like milieu in the pancreas and recruited mesenchymal cells, M2 macrophages, and fibrocytes that imparted immunoregulatory and pro-repair effects, preventing T1D.