Type 1 diabetes in the NOD mouse model has been linked to >30 insulin-dependent diabetes (Idd) susceptibility loci. Idd4 on chromosome 11 consists of two subloci, Idd4.1 and Idd4.2. Using congenic analysis of alleles in NOD and NOD-resistant (NOR) mice, we previously defined Idd4.1 as an interval containing >50 genes that controlled expression of genes in the type 1 IFN pathway. In this study, we report refined mapping of Idd4.1 to a 1.1-Mb chromosomal region and provide genomic sequence analysis and mechanistic evidence supporting its role in innate immune regulation of islet-directed autoimmunity. Genetic variation at Idd4.1 was mediated by radiation-sensitive hematopoietic cells, and type 1 diabetes protection conferred by the NOR allele was abrogated in mice treated with exogenous type 1 IFN-β. Next generation sequence analysis of the full Idd4.1 genomic interval in NOD and NOR strains supported Nlrp1b as a strong candidate gene for Idd4.1. Nlrp1b belongs to the Nod-like receptor (NLR) gene family and contributes to inflammasome assembly, caspase-1 recruitment, and release of IL-1β. The Nlrp1b of NOR was expressed as an alternative spliced isoform that skips exon 9, resulting in a premature stop codon predicted to encode a truncated protein. Functional analysis of the truncated NOR Nlrp1b protein demonstrated that it was unable to recruit caspase-1 and process IL-1β. Our data suggest that Idd4.1-dependent protection from islet autoimmunity is mediated by differences in type 1 IFN- and IL-1β-dependent immune responses resulting from genetic variation in Nlrp1b.