Type 1 diabetes (T1D) results from autoimmune attack of insulin-producing pancreatic islet β cells. T1D autoimmunity is associated with particular MHC or HLA types in mouse or humans. T1D autoimmunity arises from defects in both central negative selection and peripheral regulation of autoreactive T cells as well as intrinsic defects of B cells. Current therapies that target at improving peripheral tolerance of autoreactive T cells or depleting B cells have not yielded significant therapeutic effects in reversal of autoimmunity in T1D patients. Induction of mixed chimerism with bone marrow cells from non-autoimmune donors has been recently indicated to be a curative therapy for reversal of autoimmunity in T1D. In this review, we have summarized and discussed T1D related abnormalities in the hematopoietic compartment, regimens that induce mixed chimerism in the T1D animal model of non-obese diabetic (NOD) mice, and how mixed chimerism corrects central negative selection and peripheral tolerance of autoreactive T and B cells.