This investigation aimed to establish the promising role of insulin-producing cells (IPCs) growing from bone marrow-mesenchymal stem cells (BM-MSCs) in relieving hyperglycemia induced in rats. BM-MSCs were differentiated into IPCs using three different protocols. The efficiency of BM-MSCs differentiation into IPCs in vitro was confirmed by detecting IPCs specific gene expression (Foxa-2, PDX-1 and Ngn-3) and insulin release assay. The in vivo study design included 3 groups of male Wistar rats; negative control group, diabetic group and IPCs-transfused group (5 ×106 cells of the most functional IPCs/rat). One month after IPCs infusion, serum glucose, insulin, c-peptide and visfatin levels as well as pancreatic glucagon level were quantified. Gene expression analysis of pancreatic Foxa-2 and Sox-17, IGF-1 and FGF-10 was done. Additionally, histological investigation of pancreatic tissue sections was performed. Our data clarified that, the most functional IPCs are those generated from BM-MSCs using differentiation protocol 3 as indicated by the significant up-regulation of Foxa-2, PDX-1 and Ngn-3 gene expression levels. These findings were further emphasized by releasing of a significant amount of insulin in response to glucose load. The transplantation of the IPCs in diabetic rats elicited significant decline in serum glucose, visfatin and pancreatic glucagon levels along with significant rise in serum insulin and c-peptide levels. Moreover, it triggered significant up-regulation in the expression levels of pancreatic Foxa-2, Sox-17, IGF-1 and FGF-10 genes versus the untreated diabetic counterpart. The histopathological examination of pancreatic tissue almost assisted the biochemical and molecular genetic analyses. These results disclose that the cell therapy holds potential to develop a new cure for DM based on the capability of BM-MSCs to generate β-cell phenotype using specific protocol.