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Type 1 Diabetes (T1D) is an autoimmune disease characterized by selective loss of pancreatic β-cells. Aberrant reactivity to insulin and insulin precursor peptides has long been considered important in the pathogenesis of T1D. Recently, T cells recognizing hybrid insulin peptides (HIPs) have been described, first in a rodent model and later in human T1D. A HIP is a CD4 T-cell epitope that is formed by the post-translational fusion of two peptide fragments with at least one of the peptide fragments derived from insulin or a precursor. HIP formation can occur intra- or intermolecularly. The role of these HIPs in the pathogenesis of T1D remains unclear. Others have proposed that HIPs are formed in β-cells during crinophagy of secretory granules. As ultrastructural studies have demonstrated that β-cells can transfer secretory vesicles to local antigen presenting cells (APCs) , we hypothesized that APCs could similarly generate HIPs via protease mediated transpeptidation. To test this, we manufactured peptide-containing nanocarriers mimicking β-cell secretory vesicles to transfer selected peptides to APCs in both mouse and human in vitro systems utilizing donor APCs and CD4 TCR transgenic T cells or a CD4 transductant reporter cells respectively. Here, we demonstrate the subsets of APCs which are capable of intramolecular and intermolecular HIP formation. We further demonstrate that this formation can be blocked by proteosome inhibition. Our study identifies a novel mechanism for the generation of HIPs recognized in T1D. Disclosure S.A.Khokhar: None. M.Liu: None. J.L.Gaglia: Advisory Panel; Dompé, Regeneron Pharmaceuticals Inc., Consultant; Vertex Pharmaceuticals Incorporated, Research Support; Avotres Inc., Dompé, Janssen Research & Development, LLC, Provention Bio, Inc., Stock/Shareholder; Vertex Pharmaceuticals Incorporated. Funding National Institutes of Health 5P30DK036836JDRF 5-ECR-2016-186-A-N