Autoimmune diseases including type 1 diabetes (T1D) result from disordered immune tolerance. We showed that an endoplasmic reticulum (ER) stress signature predicted poor outcome in recent-onset T1D patients, and is observed in a proportion of at-risk first degree relatives (FDR). To determine the relationship of ER stress to immune cell signalling, we compared monocyte and T cell STAT3 phosphorylation in response to IL-6 and IL-10 in 30 T1D, 35 FDR, 11 healthy controls, and 22 rheumatoid arthritis (RA) disease controls. Cytokine-stimulated signalling was detected in peripheral blood monocytes and T cells by flow cytometry. Expression of ER stress genes GRP78 and DDIT3 was quantified from PBMCs by RT-PCR. Induction of phospho (P)-STAT3 by IL-10 but not IL-6 was significantly reduced in T1D and FDR monocytes and T cells relative to healthy or RA controls. Basal levels of total STAT3 were comparable in all groups. This reduction in P-STAT3 response in T1D patients and FDR was associated with reduced IL-10-, but not IL-6-receptor expression by monocytes and T cells. IL-10 receptor expression and P-STAT3 induction in response to IL-6 and IL-10 were negatively associated with GRP78 and DDIT3 ER stress gene expression. IL-10 was shown to block ER stress in gut epithelium. Thus, our data implicate a disease-specific IL-10 receptor defect and its consequences on excess ER stress and disordered peripheral tolerance in T1D pathogenesis.