Objective Type 1 diabetes is caused by destruction of beta cells of pancreas. Vildagliptin (VG), a dipeptidyl peptidase IV (DPP IV) inhibitor, is an anti-diabetic drug, which increases beta cell mass. In the present study, the effects of VG on generation of insulin-producing cells (IPCs) from adipose-derived mesenchymal stem cells (ASCs) is investigated. Materials and Methods In this experimental study, ASCs were isolated and after characterization were exposed to differentiation media with or without VG. The presence of IPCs was confirmed by morphological analysis and gene expression (Pdx-1, Glut-2 and Insulin). Newport Green staining was used to determine insulin-positive cells. Insulin secretion under different concentrations of glucose was measured using radioimmunoassay method. Results In the presence of VG the morphology of differentiated cells was similar to the pancreatic islet cells. Expression of Pdx-1, Glut-2 and Insulin genes in VG-treated cells was significantly higher than the cells exposed to induction media only. Insulin release from VG-treated ASCs showed a nearly 3.6 fold (P<0.05) increase when exposed to a high- glucose medium in comparison to untreated ASCs. The percentage of insulin-positive cells in the VG-treated cells was approximately 2.9-fold higher than the untreated ASCs. ConclusionThe present study has demonstrated that VG elevates differentiation of ASCs into IPCs. Improvement of this protocol may be used in cell therapy in diabetic patients.