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                                                                   Exhibit 10.27

                             DIGITAL ISLAND, INC.


                      2000 SUPPLEMENTAL STOCK OPTION PLAN
                      -----------------------------------


                                  ARTICLE ONE

                                    GENERAL
                                    -------

     I.   PURPOSE OF PLAN

          A.   This Supplemental Stock Option Plan is intended to promote the
interests of Digital Island, Inc., a Delaware corporation, by authorizing an
additional reserve of shares of the Corporation's common stock for issuance to
individuals in the employ or service of the Corporation (or any Parent or
Subsidiary) who are neither officers of the Corporation nor members of the
Board.

          B.   The Plan shall supplement the authorized share reserve under the
Corporation's 1999 Stock Incentive Plan, and share issuances under this Plan
shall not reduce or otherwise affect the number of shares of the Corporation's
common stock available for issuance under the 1999 Stock Incentive Plan.  In
addition, share issuances under the 1999 Stock Incentive Plan shall not reduce
or otherwise affect the number of shares of the Corporation's common stock
available for issuance under this Plan.

          Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

     II.  ADMINISTRATION OF THE PLAN

          A.   The Primary Committee shall have the primary authority to
administer the Plan with respect to all eligible persons, but either the Board
or the Primary Committee may at any time appoint a Secondary Committee to have
separate but concurrent jurisdiction to administer the Plan with respect to one
or more class of persons eligible to participate in the Plan. Each Plan
Administrator shall, within the scope of its administrative functions under the
Plan, have full power and discretion (subject to the express provisions of the
Plan) to establish such rules and regulations as it may deem appropriate for the
proper administration of the Plan and to make such determinations under, and
issue such interpretations of, the provisions of the Plan and any outstanding
option grants thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator within the scope of its administrative functions under the
Plan, shall be final and binding on all parties who have an interest in the Plan
or any outstanding stock option thereunder.

          B.   Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time.
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          C.   Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as a Board
member for such service. No member of the Primary Committee or the Secondary
Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option grant made under the Plan.

    III.  ELIGIBILITY

          A.   The persons eligible to participate in the Plan shall be limited
to (i) those Employees who are neither officers of the Corporation nor members
of the Board and (ii) independent consultants in the service of the Corporation
(or any Parent or Subsidiary), including members of the Corporation's Strategic
Advisory Board.

          B.   Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine
which eligible Employees and consultants are to receive option grants under the
Plan, the time or times when the grants are to be made, the number of shares
subject to each such grant, the time or times when each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding. All options granted under the Plan shall be Non-Statutory Options.

    IV.   STOCK SUBJECT TO THE PLAN

          A.   Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock reserved for issuance over the term of the Plan shall be
limited to 1,000,000 shares, subject to adjustment from time to time in
accordance with the provisions of Section IV.C.

          B.   Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full, then the shares subject to
the portion of each option not so exercised shall be available for subsequent
issuance under the Plan. Should the exercise price of an outstanding option
under the Plan be paid with shares of Common Stock, then the number of shares of
Common Stock available for issuance under the Plan shall be reduced by the gross
number of shares for which the option is exercised, and not by the net number of
shares of Common Stock actually issued to the holder of such option.

          C.   Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, and (ii) the number and/or class of
securities and price per share in effect under each option outstanding under the
Plan. Such adjustments to the outstanding securities are to be effected in a
manner which shall preclude the enlargement or dilution of rights and benefits
under such options. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.

                                       2
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                                  ARTICLE TWO

                             OPTION GRANT PROGRAM
                             --------------------

     I.   OPTION TERMS

          Options granted under the Plan shall be authorized by action of the
Plan Administrator and shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; provided, however, that each such instrument
                                    --------
shall comply with the terms and conditions specified below.  All such granted
options shall be Non-Statutory Options.

          A.   Exercise Price.
               --------------

               1.   The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the grant date.

               2.   The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the forms
specified below:

                    (i)     cash or check made payable to the Corporation,

                    (ii)    shares of Common Stock held for the requisite period
     necessary to avoid a charge to the Corporation's earnings for financial
     reporting purposes and valued at Fair Market Value on the Exercise Date, or

                    (iii)   through a special sale and remittance procedure
     pursuant to which the Optionee shall concurrently provide irrevocable
     instructions (a) to a Corporation-designated brokerage firm to effect the
     immediate sale of the purchased shares and remit to the Corporation, out of
     the sale proceeds available on the settlement date, sufficient funds to
     cover the aggregate exercise price payable for the purchased shares plus
     all applicable Federal, state and local income and employment taxes
     required to be withheld by the Corporation in connection with such purchase
     and (b) to the Corporation to deliver the certificates for the purchased
     shares directly to such brokerage firm in order to complete the sale
     transaction.

          Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

          B.   Exercise and Term of Options.  Each option shall be exercisable
               ----------------------------
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing such option. No option shall have a maximum term in excess of ten
(10) years measured from the option grant date.

                                       3
<PAGE>

          C.   Limited Transferability.  Each option granted under the Plan
               -----------------------
shall, during the Optionee's lifetime, be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or the laws of
inheritance following the Optionee's death. However, the option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under the Plan,
and those options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee's death while
holding those options. Such beneficiary or beneficiaries shall take the
transferred options subject to all the terms and conditions of the applicable
agreement evidencing each such transferred option, including (without
limitation) the limited time period during which the option may be exercised
following the Optionee's death.

          D.   Effect of Termination of Service.
               --------------------------------

                    1.   The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:

                         (i)    Any option outstanding at the time of the
     Optionee's cessation of Service for any reason shall remain exercisable for
     such period of time thereafter as shall be determined by the Plan
     Administrator and set forth in the documents evidencing the option, but no
     such option shall be exercisable after the expiration of the option term.

                         (ii)   Any option exercisable in whole or in part by
     the Optionee at the time of death may be subsequently exercised by the
     personal representative of the Optionee's estate or by the person or
     persons to whom the option is transferred pursuant to the Optionee's will
     or the laws of inheritance or by the Optionee's designated beneficiary or
     beneficiaries of that option.

                         (iii)  Should the Optionee's Service be terminated for
     Misconduct or should Optionee otherwise engage in any Misconduct while
     holding one or more options under the Plan, then those options shall
     terminate immediately and cease to be outstanding.

                         (iv)   During the applicable post-Service exercise
     period, the option may not be exercised in the aggregate for more than the
     number of shares for which the option is exercisable on the date of
     Optionee's cessation of Service. Upon the expiration of such post-Service
     exercise period or (if earlier) upon the expiration of the option term, the
     option shall terminate and cease to be

                                       4
<PAGE>

     outstanding for any otherwise exercisable shares for which the option has
     not been exercised. However, the option shall, immediately upon Optionee's
     cessation of Service for any reason, terminate and cease to be outstanding
     with respect to any and all option shares for which the option is not
     otherwise at the time vested and exercisable.

               2.   The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                    (i)    extend the period of time for which the option is to
     remain exercisable following Optionee's cessation of Service or death from
     the limited period otherwise in effect for that option to such greater
     period of time as the Plan Administrator shall deem appropriate, but in no
     event beyond the expiration of the option term, and/or

                    (ii)   permit the option to be exercised, during the
     applicable post-Service exercise period, not only with respect to the
     number of shares of Common Stock for which such option is exercisable at
     the time of the Optionee's cessation of Service but also with respect to
     one or more additional installments for which the option would have become
     exercisable had the Optionee continued in Service.

          E.   Stockholder Rights.  No Optionee shall have any stockholder
               ------------------
rights with respect to any option shares until such person shall have exercised
the option and paid the exercise price for the purchased shares.

     II.  CORPORATE TRANSACTION/CHANGE IN CONTROL

          A.   Each option outstanding under the Plan at the time of a Corporate
Transaction shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for that Corporate
Transaction, become exercisable for all of the shares of Common Stock at the
time subject to that option and may be exercised for any or all of those shares
as fully-vested shares. However, an outstanding option shall not become
exercisable on such an accelerated basis if and to the extent: (i) such option
is, in connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on any shares for which the
option is not otherwise at that time exercisable and provides for subsequent
payout of that spread in accordance with the same exercise/vesting schedule
applicable to those option shares or (iii) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant.

          B.   Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

                                       5
<PAGE>

          C.   Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, and (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan. To the extent the actual holders
of the Corporation's outstanding Common Stock receive cash consideration for
their Common Stock in consummation of the Corporate Transaction, the successor
corporation may, in connection with the assumption of the outstanding options
under this Plan, substitute one or more shares of its own common stock with a
fair market value equivalent to the cash consideration paid per share of Common
Stock in such Corporate Transaction.

          D.   The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Plan so that those options
shall, immediately prior to the effective date of such Corporate Transaction,
become exercisable for all the shares of Common Stock at the time subject to
those options and may be exercised for any or all of those shares as fully
vested shares of Common Stock, whether or not those options are to be assumed in
the Corporate Transaction.

          E.   The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Plan so that those options
shall become exercisable for all the shares of Common Stock at the time subject
to those options in the event the Optionee's Service is subsequently terminated
by reason of an Involuntary Termination within a designated period (not to
exceed eighteen (18) months) following the effective date of any Corporate
Transaction in which those options are assumed and do not otherwise accelerate.
Any options so accelerated shall remain exercisable for fully vested shares
until the expiration or sooner termination of the option term.

          F.   The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Plan so that those options
shall, immediately prior to the effective date of a Change in Control, become
exercisable for all the shares of Common Stock at the time subject to those
options and may be exercised for any or all of those shares as fully vested
shares of Common Stock. Alternatively, the Plan Administrator may condition the
automatic acceleration of one or more outstanding options under the
Discretionary Option Grant Program and the termination of one or more of the
Corporation's outstanding repurchase rights under such program upon the
subsequent termination of the Optionee's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control. Each option so
accelerated shall remain exercisable for fully vested shares until the
expiration or sooner termination of the option term.

          G.   The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets

                                       6
<PAGE>

                                 ARTICLE THREE

                                 MISCELLANEOUS
                                 -------------

    I.    EFFECTIVE DATE AND TERM OF PLAN

          A.   This Plan became effective immediately upon approval by the Board
and shall not be subject to stockholder approval.

          B.   The Plan shall terminate upon the earlier of (i) December 31,
2010 or (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares under the Plan or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. If the date of termination is determined under clause (i) above,
then all option grants outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the instruments
evidencing those grants or issuances.

    II.   AMENDMENT OF THE PLAN

          The Board has complete and exclusive power and authority to amend or
modify the Plan in any or all respects whatsoever.  However, no such amendment
or modification shall adversely affect the rights and obligations of the holders
of the stock options at the time outstanding under the Plan, unless the affected
individuals consent to such amendment.

    III.  USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants under the Plan shall be used for general corporate
purposes.

    IV.   REGULATORY APPROVALS

          A.   The implementation of the Plan, the granting of any options under
the Plan, and the issuance of Common Stock upon the exercise of those stock
options shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the stock options granted under it and the Common Stock issued pursuant to it.

          B.   No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
the Common Stock is then listed for trading.

                                       7
<PAGE>

    V.    TAX WITHHOLDING

          The Corporation's obligation to deliver shares of Common Stock upon
the exercise of outstanding stock options under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.

    VI.   NO EMPLOYMENT/SERVICE RIGHTS

          Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in
Service for any period of specific duration, and the Corporation (or any Parent
or Subsidiary employing such individual) may terminate such individual's Service
at any time and for any reason, with or without cause.

    VII.  MISCELLANEOUS PROVISIONS

          A.   The right to acquire Common Stock or other assets under the Plan
may not be assigned, encumbered or otherwise transferred by any Optionee, except
as expressly provided herein

          B.   The provisions of the Plan relating to the exercise of options
and the vesting of shares shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and performed in
such state.

          C.   The provisions of the Plan shall insure to the benefit of, and
shall be binding upon, the Corporation and its successors and assigns, whether
by Corporate Transaction or otherwise, and the Optionees and the legal
representatives, heirs or legatees of their respective estates.

                                       8
<PAGE>

                                   APPENDIX
                                   --------

          The following definitions shall be in effect under the Plan:

          A.   Board shall mean the Corporation's Board of Directors.
               -----
          B.   Change in Control shall mean a change in ownership or control of
               -----------------
the Corporation effected through either of the following transactions:

               (i)    the acquisition, directly or indirectly, by any person or
     related group of persons (other than the Corporation or a person that
     directly or indirectly controls, is controlled by, or is under common
     control with, the Corporation), of beneficial ownership (within the meaning
     of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
     percent (50%) of the total combined voting power of the Corporation's
     outstanding securities pursuant to a tender or exchange offer made directly
     to the Corporation's stockholders; or

               (ii)   a change in the composition of the Board over a period of
     thirty-six (36) consecutive months or less such that a majority of the
     Board members ceases, by reason of one or more contested elections for
     Board membership, to be comprised of individuals who either (A) have been
     Board members continuously since the beginning of such period or (B) have
     been elected or nominated for election as Board members during such period
     by at least a majority of the Board members described in clause (A) who
     were still in office at the time the Board approved such election or
     nomination.

          C.   Code shall mean the Internal Revenue Code of 1986, as amended.
               ----

          D.   Common Stock shall mean the Corporation's common stock.
               ------------

          E.   Corporate Transaction shall mean any of the following
               ---------------------
stockholder-approved transactions to which the Corporation is a party:

               (i)   a merger or consolidation in which securities possessing
     more than fifty percent (50%) of the total combined voting power of the
     Corporation's outstanding securities are transferred to a person or persons
     different from the persons holding those securities immediately prior to
     such transaction, or

               (ii)  the sale, transfer or other disposition of all or
     substantially all of the Corporation's assets in complete liquidation or
     dissolution of the Corporation.

          F.   Corporation shall mean Digital Island, Inc., a Delaware
               -----------
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Digital Island, Inc. which shall by appropriate action
adopt the Plan.

                                      A-1
<PAGE>

          G.   Employee shall mean an individual who is in the employ of the
               --------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

          H.   Exercise Date shall mean the date on which the Corporation shall
               -------------
have received written notice of the option exercise.

          I.   Fair Market Value per share of Common Stock on any relevant date
               -----------------
shall be determined in accordance with the following provisions:

               (i)   If the Common Stock is at the time traded on the Nasdaq
     National Market, then the Fair Market Value shall be the closing selling
     price per share of Common Stock on the date in question, as such price is
     reported by the National Association of Securities Dealers on the Nasdaq
     National Market. If there is no closing selling price for the Common Stock
     on the date in question, then the Fair Market Value shall be the closing
     selling price on the last preceding date for which such quotation exists.

               (ii)  If the Common Stock is at the time listed on any Stock
     Exchange, then the Fair Market Value shall be the closing selling price per
     share of Common Stock on the date in question on the Stock Exchange
     determined by the Plan Administrator to be the primary market for the
     Common Stock, as such price is officially quoted in the composite tape of
     transactions on such exchange. If there is no selling price for the Common
     Stock on the date in question, then the Fair Market Value shall be the
     closing selling price on the last preceding date for which such quotation
     exists.

          J.   Involuntary Termination shall mean the termination of the
               ------------------------
Service of any individual which occurs by reason of:

               (i)   such individual's involuntary dismissal or discharge by the
     Corporation for reasons other than Misconduct, or

               (ii)  such individual's voluntary resignation following (A) a
     change in his or her position with the Corporation which materially reduces
     his or her duties and responsibilities or the level of management to which
     he or she reports, (B) a reduction in his or her level of compensation
     (including base salary, fringe benefits and target bonus under any
     corporate-performance based bonus or incentive programs) by more than
     fifteen percent (15%) or (C) a relocation of such individual's place of
     employment by more than fifty (50) miles, provided and only if such change,
     reduction or relocation is effected by the Corporation without the
     individual's consent.

                                      A-2
<PAGE>

          K.   Misconduct shall mean the commission of any act of fraud,
               ----------
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee or other person in the Service of the Corporation (or any Parent
or Subsidiary).

          L.   1934 Act shall mean the Securities Exchange Act of 1934, as
               --------
amended.

          M.   Non-Statutory Option shall mean an option not intended to
               --------------------
satisfy the requirements of Code Section 422.

          N.   Option Grant Program shall mean the option grant program in
               --------------------
effect under the Plan.

          O.   Optionee shall mean any person to whom an option is granted
               --------
under the Plan.

          P.   Parent shall mean any corporation (other than the Corporation)
               ------
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

          Q.   Permanent Disability or Permanently Disabled shall mean the
               --------------------------------------------
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.

          R.   Plan shall mean the Corporation's 2000 Supplemental Stock Option
               ----
Plan, as set forth in this document.

          S.   Plan Administrator shall mean both the Primary Committee and the
               -------------------
Secondary Committee in the performance of their administrative functions under
Plan.

          T.   Primary Committee shall mean the committee of two (2) or more
               -----------------
non-employee Board members appointed by the Board to serve as the primary
administrator of the Plan.

          U.   Secondary Committee shall mean a committee of one or more Board
               -------------------
members appointed by the Board to have separate but concurrent jurisdiction with
the Primary Committee to administer the Plan with respect to one or more classes
of individuals designated by the Board or by the Primary Committee.

                                      A-3
<PAGE>

          V.   Service shall mean the performance of services for the
               -------
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee or a consultant or other independent advisor, except to the extent
otherwise specifically provided in the documents evidencing the option grant.

          W.   Stock Exchange shall mean either the American Stock Exchange or
               --------------
the New York Stock Exchange.

          X.   Subsidiary shall mean any corporation (other than the
               ----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

                                      A-4