Effective central tolerance is required to control the large extent of autoreactivity normally present in the developing B cell repertoire. Insulin-reactive B cells are required for type 1 diabetes in the NOD mouse, because engineered mice lacking this population are protected from disease. The Cg-Tg(Igh-6/Igh-V125)2Jwt/JwtJ (VH125Tg) model is used to define this population, which is found with increased frequency in the periphery of NOD mice versus nonautoimmune C57BL/6 VH125Tg mice; however, the ontogeny of this disparity is unknown. To better understand the origins of these pernicious B cells, anti-insulin B cells were tracked during development in the polyclonal repertoire of VH125Tg mice. An increased proportion of insulin-binding B cells is apparent in NOD mice at the earliest point of Ag commitment in the bone marrow. Two predominant L chains were identified in B cells that bind heterologous insulin. Interestingly, Vκ4-57-1 polymorphisms that confer a CDR3 Pro-Pro motif enhance self-reactivity in VH125Tg/NOD mice. Despite binding circulating autoantigen in vivo, anti-insulin B cells transition from the parenchyma to the sinusoids in the bone marrow of NOD mice and enter the periphery unimpeded. Anti-insulin B cells expand at the site of autoimmune attack in the pancreas and correlate with increased numbers of IFN-γ-producing cells in the repertoire. These data identify the failure to cull autoreactive B cells in the bone marrow as the primary source of anti-insulin B cells in NOD mice and suggest that dysregulation of central tolerance permits their escape into the periphery to promote disease.