Aim: Major challenges to islet transplantation in Type 1 diabetes include host-inflammation, which results in failure to maintain survival and functions of transplanted islets. Therefore, this study investigated the applications of encapsulating the bile acid ursodeoxycholic acid (UDCA) with transplanted islets within improved nano-gel systems for Type 1 diabetes treatment. Materials methods: Islets were harvested from healthy mice, encapsulated using UDCA-nano gel and transplanted into the diabetic mice, while the control group was transplanted encapsulated islets without UDCA. The two groups' survival plot, blood glucose, and inflammation and bile acid profiles were analyzed. Results conclusion: UDCA-nano gel enhanced survival, glycemia and normalized bile acids' profile, which suggests improved islets functions and potential adjunct treatment for insulin therapy.