Early loss of grafted islets is the main obstacle to achieve favorable outcomes of islet transplantation. Mesenchymal stem cells are known to have a protective effect; however, its mechanism remains unclear. We hypothesized that bone marrow-derived mesenchymal stem cells (BMSCs) can protect grafted islets against endoplasmic reticulum stress (ERS)-induced apoptosis. In syngeneic streptozocin-induced diabetic BALB/c mice, islet grafts decreased blood glucose levels; however, the effect was not fully functional from the immediate post-transplant phase. beta-Cell apoptosis was proven on days 1 and 3 after transplantation. Ultra-structural evidence of ERS was observed along with increased expressions of marker protein BIP and apoptosis-related protein CHOP. In contrast, BMSC co-transplantation maintained glucose hemostasis, inhibited apoptosis and alleviated ERS. In ex vivo culture, BMSCs improved viability of islets and decreased apoptosis. Increased ERS were observed in cultured islets exposed to hypoxia, but not in the islets cocultured with BMSCs. Furthermore, cocultured BMSCs protected islets against ERS-induced apoptosis as well as improved their insulin secretion, and BMSCs alleviated ERS by improving Myc expression through both stromal cell-derived factor 1 signal and contact effect. In conclusion, BMSCs protected the grafted islets against ERS-induced apoptosis during the early stage after transplantation. This study opens a new arena for ERS-targeted therapy to improve outcomes of islet transplantation.