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OBJECTIVE Podocyte injury has a critical role in the pathogenesis of diabetic nephropathy (DN). Microencapsulated islet transplantation (MIT) is identified as an effective method for improving the clinical condition of DN. This study aimed to explore the role and mechanism of MIT in alleviating podocyte injury in DN. METHODS A mouse model of DN was constructed using streptozotocin (STZ). Mice were divided into 3 groups: the untreated diabetic nephropathy group (DN group), the microencapsulated islet transplantation-treated group (MIT group) and the control group. The mice were raised for 6 weeks posterior to islet transplantation to identify the role of MIT. Renal function and structure of glomerular filtration barrier were assessed by urine analysis, histopathological examination, and transmission electron microscopy. The expression levels of several proteins including Caspase-3, Bcl2/Bax, β-galactosidase, Ki-67, synaptopodin, WT-1, Jagged-1, Notch-1, and Hes-1 in renal tissues were identified via immunohistochemistry (IHC), immunofluorescence (IF), and western blotting techniques. RESULTS Compared with the DN group, the MIT group presented decreased levels of blood glucose, urinary albumin/creatinine, urea nitrogen, and serum creatinine while their body weight gradually increased. Glomerular injury in the MIT group was significantly better than that in the DN group. The MIT group indicated significantly decreased expression of Caspase-3, β-galactosidase, Bax/Bcl-2, and Ki-67 when compared with DN group, while the proportion of synaptopodin- and WT-1-positive cells was significantly increased (P < 0.05). The protein expression of Jagged-1, Notch-1, and Hes-1 in the glomerulus of the MIT group was significantly lower than that in the DN group (P < 0.05). CONCLUSION MIT alleviates podocyte injury induced by DN by inhibiting Notch-1 signaling. The identification of signaling pathways influencing podocyte restoration can help evaluate personalized medicine efficacy for patients treated with islet transplantation.