Islet-resident macrophages contribute to hypoxia-induced islet cell death during pancreatic islet transplantation. However, their specific role during this process remains elusive. Here, we report that interleukin-1α (IL-1α) and IL-1β are released by islet-resident macrophages, resulting in the suppression of insulin secretion. This may be due to a decreased inflammation-driven expression of pancreatic and duodenal homeobox 1 (PDX-1) and MafA in β cells. Islet-resident macrophages release significantly less IL-1α when compared to IL-1β. However, both cytokines inhibit insulin expression and secretion to a comparable extent. We identified heparan sulfate on the islet surface, which acts as a "molecular glue" potentiating the inhibitory action of IL-1α on insulin expression via specific binding to IL-1 receptor (IL-1R). In vivo analyses revealed that the loss of IL-1 signaling in isolated islets accelerates their revascularization and, thus, enhances their endocrine function. These findings indicate that heparan sulfate fine-tuned IL-1 signaling crucially determines the outcome of islet transplantation.