Diabetes mellitus is the most common metabolic disorder, which occurs in two forms: Type 1 diabetes (juvenile or insulin-dependent diabetes mellitus) and Type 2 diabetes (adult or noninsulin-dependent diabetes mellitus). Type 1 diabetes mellitus is a T-cell-mediated, organ-specific autoimmune disorder, in which the body's own immune system attacks beta-cells and damages them sufficiently resulting in reduced insulin production. To overcome autoimmunity, immunosuppressive therapy, gene therapy, islet cell regeneration or encapsulation of islet cells offer dramatic treatment solutions. At present, efforts for finding ways to replace damaged insulin-secreting beta-cells by implanting new cells is an active field of research. Various therapeutic strategies are under investigation and stem cell-based therapy with the combination of other treatments offers exciting possibilities for the development of treatment for such diseases. In the current review, we focus on stem cells and their potential clinical applications and summarize the recent progress in this field.