Islet transplantation is a potential treatment option for certain patients with type 1 diabetes; however, it still faces barriers to widespread use, including the lack of tools to monitor islet grafts post-transplantation. This study investigates whether labeling neonatal porcine islets (NPI) with polyvinylpyrrolidone-coated superparamagnetic iron oxide nanoparticles (PVP-SPIO) affects their function, and whether this nanoparticle can be utilized to monitor NPI xenografts with magnetic resonance imaging (MRI) in a mouse model. In vitro, PVP-SPIO-labeled NPI in an agarose gel was visualized clearly by MRI. PVP-SPIO-labeled islets were then transplanted under the kidney capsules of immunodeficient nondiabetic and diabetic mice. All diabetic mice that received transplantation of PVP-SPIO-labeled islets reached normoglycemia. Grafts appeared as hypo-intense areas on MRI and were distinguishable from the surrounding tissues. Following injection of spleen cells from immunocompetent mice, normoglycemic recipient mice became diabetic and islet grafts showed an increase in volume, accompanied by a mixed signal on MRI. Overall, this study demonstrates that PVP-SPIO did not affect the function of NPI that PVP-SPIO-labeled islets were easily seen on MRI, and changes in MRI signals following rejection suggest a potential use of PVP-SPIO-labeled islets to monitor graft viability.