Stem cell engraftment is currently a promising approach for type 1 diabetes mellitus (T1DM) treatment. In our previous study, engraftment of a combination of human amniotic epithelial cells (hAECs) and hyaluronic acid (HA) showed potent anti-diabetic effect in streptozotocin (STZ)-induced T1DM mice via tail vein injection. Here, we adopted a different route of stem cell delivery, that is via pancreatic subcapsular transplantation. This combined local engraftment of hAECs and HA in STZ-induced T1DM rats showed potent anti-diabetic activity, leading to stronger hypoglycaemia, more intact islet structure and increased number of insulin-positive cells compared with those with hAECs or insulin treatments. Engraftment of hAECs alone increased the proportion of Th1 and T-reg cells and decreased the proportion of Th2 and Th17 cells to protect islet β cells in STZ-induced T1DM rats, whereas the combined engraftment of hAECs and HA showed more potent regulatory capacity, considerably decreased the level of TNF-α and IL-17 and increased the level of TGF-β1 compared with those by other treatments. The potent synergistic effect of HA contributed to the recovery of immune balance in the diabetic rat model, thereby suggesting a new strategy for effective treatment of T1DM.Keywords: combined local engraftment; human amniotic epithelial cells; hyaluronic acid; recovery of immune balance; type 1 diabetes.