Diabetes is characterized by insulin deficiency concomitant with hyperglycemia due to reduced islet cell mass and/or dysfunction. Currently, insulin replacement is the first-line treatment option for patients with type 1 and a severe form of type 2diabetes. Treatment by insulin injection is generally effective but nonphysiological, and has the potential of producing chronic complications. On the other hand, islet transplantation can maintain normoglycemia without hypoglycemic side effects, potentially freeing diabetic patients of insulin dependence. In practice, islet transplantation remains hindered by the lack of organ donors and transplant rejection concerns. Recent advances in stem cell research and regenerative medicine, however, offer promise for the clinical application of islet cell transplantation. This review article offers a critical appraisal of current molecular induction approaches, such as directed differentiation, microenvironment induction, and genetic modification, which mimic islet cell development by inducing a variety of stem cells; they include embryonic stem cells, induced pluripotent stem cells, and various tissue-derived stem cells to become functional and transplantable insulin-producing islet cells. Despite good progress, several obstacles remain to be overcome before islet transplantation can be translated into a therapy for human patients, including, but are not limited to, immunogenicity and risk of tumorogenesis. Keywords: Diabetes mellitus, immunogenicity, in vivo regeneration, islet engineering, stem cell therapy, transplantation