Hypoxia is a major cause of considerable islet loss during the early post-transplantation period. Here, we investigate whether shielding islets with human amniotic epithelial cells (hAECs), which possess anti-inflammatory and regenerative properties, improves islet engraftment and survival. Shielded islets were generated on agarose microwells by mixing rat (RI) or human (HI) islets and hAECs (100 hAECs/IEQ). Islet secretory function and viability were assessed after culture in hypoxia (1% O2) or normoxia (21% O2) in vitro. In vivo function was evaluated after transplantation under the kidney capsule of diabetic immunodeficient mice. Graft morphology and vascularization were evaluated by immunohistochemistry. Both shielded RI and HI show higher viability and increased glucose-stimulated insulin secretion after exposure to hypoxia in vitro compared to control islets. Transplantation of shielded islets results in considerably earlier normoglycemia and vascularization, an enhanced glucose tolerance and a higher β-cell mass. Our results how that hAECs have a clear cytoprotective effect against hypoxic damages in vitro. This strategy improves β-cell mass engraftment and islet revascularization, leading to an improved capacity of islets to reverse hyperglycaemia, and could be rapidly applicable in the clinical situation seeing that the modification to human islets are minor.