Many approaches of stem-cell therapy for the treatment of diabetes have been described. One is the application of stem cells for replacement of nonfunctional islet cells in the native endogenous pancreas; another one is the use of stem cells as an inexhaustible source for islet-cell transplantation. During recent years three types of stem cells have been investigated: embryonic stem cells, bone-marrow-derived stem cells and organ-bound stem cells. We discuss the advantages and limitations of these different cell types. The applicability for the treatment of dysfunction of beta cells in the pancreas has been demonstrated for all three cell types, but more-detailed understanding of the sequence of events during differentiation is required to produce fully functional insulin-producing cells.