Decreasing local inflammation at the graft site will improve efficacy of islet transplantation in reversing diabetes and may decrease the dose of immunomodulatory drugs that are needed to prevent graft rejection. Localized immunomodulatory and anti-inflammatory (LISAI) platform improves drug solubility, stability, durability and site-targeting. We aim to develop a novel clinically applicable LISAI platform using nanomaterials with chemically customizable hydrophobicity for sustained and local delivery of anti-inflammatory drugs to improve islet transplantation in type-1 diabetes. We synthetized amphiphilic block copolymers made of poly(ethylene glycol)-poly(propylene sulfide) (PEG-PPS) and PEG-oligo(ethylene sulfide) (PEG-OES) that can self-assemble into solid core micelles and nanofibers and that display tunable drug encapsulation and release capacity. We demonstrated that these nanomaterials are non-immunogenic, non-toxic, and can traffic to lymph nodes (LNs) to target LN-resident immune cells. Here, we evaluated this nanomaterial platform as LISAI for loading and releasing dexamethasone (Dexa) and cyclosporine A (CsA) in the islet graft site by using recently optimized diabetes-relevant in vitro models.