Background. Transplantation of engineered β cell-derived lines is a promising modality for cell-based therapy of diabetes mellitus. The in vivo environment and antirejection and other medications may have significant effects on the differentiation and proliferation of the transplanted β cells, thus affecting their function. The effect of the in vivo environment on expression of genes encoding proteins involved in insulin production, secretion, and glucose sensing were analyzed in the RIN 1046-38 cell line. Methods. RIN 1046-38 cells, were used for s.c. implantation in cyclosporine treated rats and for parallel in vitro culture. The differential expression of the insulin, PDX-1, GLUT-2, and glucokinase genes were assessed by quantitative reverse transcription polymerase chain reaction. Results. The in vivo environment of cyclosporine-treated rats, preserved most of the differentiated characteristics of the implanted cells. Insulin and glucokinase gene expression were maintained at high levels, although GLUT-2 expression decreased. This was in contrast to the substantial decrease of all the three genes expression when cultured in vitro. Cyclosporine treatment reduced insulin and GLUT-2 gene expression in in vitro culture. Conclusions. β cell implantation in cyclosporine-treated rats induces alteration in expression of genes pivotal to insulin production and secretion and the glucose sensing abilities. The normal in vivo environment improves the implanted b cell function by increasing the insulin gene expression and content. Furthermore, it reverses some of the dedifferentiating changes caused by the in vitro culture. This may have a positive effect on the therapeutic efficiency of this cell line.