Type 1 diabetes is an organ-specific autoimmune disease whose incidence is increasing worldwide. At present, there is no effective therapy to prevent or cure this disease. The genetic background (MHC and non-MHC genes) and environmental factors (pathogens, drugs, and diet) are critical for the initiation of the autoimmune response against the pancreatic beta-cells. Recognition of the pancreatic autoantigens by T cells in a predetermined environment of antigen-presenting cells, costimulation, and cytokines is crucial for the selective activation of diabetogenic or protective / regulatory T cells. Once the autoimmune process is triggered, epitope spreading and sustaining the autoimmune responses by continuous antigen stimulation leads to expansion of effector cells, which launch the attack on the beta-cells. Despite of some controversy, most of the studies in humans and animal models suggest that CD4 (Th1) T cells are directly involved in the autoimmune attack by secretion of pro-inflammatory cytokines and recruitment of cytotoxic CD8 T cells. Secretion of anti-inflammatory cytokines by Th2 cells is protective against the disease. Therapy with peptides derived from major target antigens, such as glutamic acid decarboxylase 65 or proinsulin, can prevent the disease in animal models by rising protective Th2 cells. Herein, we review the recent progress in the immunopathogenesis of Type 1 diabetes and insights into the development of new diagnostic tools and antigen-specific immunomodulators, such as MHC-peptide chimeras.