Type 1 diabetes (T1D) is an autoimmune illness that destroys pancreatic β-cells and islet β-cells associated with insulitis. Differentiation of islet β-cell is effective for treating type 1 diabetes. However, the growing global population with diabetes, limited donor supply, and the need for lifelong immunosuppression limit the widespread use of β-cell transplants. Several treatment approaches have been explored to find substitutes for β-cells, with stem cell differentiation being one of the most promising options. Stem cells can effectively cure T1D by restoring immunotolerance and maintaining islet β-cell activity. Clinical trials using cGMP-grade stem cell products demonstrated that differentiation into β-cells has favorable benefits on T1D, with no clear adverse consequences. In recent years, stem cell differentiation from mesenchymal stem cells (MSCs), embryonic stem cells (ESCs), and bone marrow hematopoietic stem cells (BM-HSCs) has been used to restore immune tolerance and sustain islet β-cell activity in T1D.