Biomaterial-based implants encapsulating islets or β-cells are desirable regimens for type 1 diabetes (T1D). However, current implants are restricted by poor durable β-cell survival due to immune cell infiltration, graft fibrosis and hypoxia. Programmed cell death-ligand 1 (PD-L1) induces T cell exhaustion, consequently protecting β-cells from autoimmune attack. Herein, we report an implant encapsulating PD-L1-overexpressing-β-cell microspheres (PD-L1 β-MCSs) and Chlorella within alginate hydrogel to control hyperglycemia in T1D. Virtually, PD-L1-β-cell derived exosomes efficaciously induce T cell exhaustion and convert macrophages into M2 phenotype in vitro. And PD-L1 β-MCSs secrete insulin in response to changes in glucose concentration. Furthermore, PD-L1-β-cell microspheres artificial Pancreas (PD-L1-β-MCSs aPancreas) prominently relieve hyperglycemia with less CD4+ T cells, CD8+ T cells, and M1 macrophages infiltration, inflammation and fibrosis deposition. Intriguingly, Chlorella produces oxygen to relieve hypoxia and enables the PD-L1-β-MCSs aPancreas-transplanted mice to achieve sustained normoglycemia, which potentially benefit from both oxygen supplementation and exosomal PD-L1.