Cell therapy using pancreatic islets would be a promising therapy to treat diabetes. But, because of the limited supply of human donor islets, other cellular sources have to be considered. Stem cells characterized by extensive proliferation and differentiation capacity may be a valuable source for the in vitro generation of islets. Insulin-producing cells derived from embryonic stem (ES) cells have been shown to reverse experimentally induced diabetes in animal models. However, the oncogenic properties of ES cells are critical in the context of clinical applications and efficient cell-lineage selection systems need to be established. Future studies have to demonstrate whether somatic stem cells residing in adult tissues, such as bone marrow, pancreatic ducts, intestine or liver may provide alternatives to generate functional pancreatic endocrine cells.