Diabetes mellitus types 1 and 2 are characterized by absolute versus relative lack of insulin-producing beta cells, respectively. Reconstitution of a functional beta-cell mass by cell therapy--using organ donor islets of Langerhans--has been demonstrated to restore euglycaemia in the absence of insulin treatment. This remarkable achievement has stimulated the search for appropriate stem cell sources from which adequate expansion and maturation of therapeutic beta cells can be achieved. This recent activity is reviewed and presented with particular focus on directed differentiation from pluripotent embryonic stem cells (versus other stem/progenitor cell sources) based on knowledge from pancreatic beta-cell development and the parallel approach to controlling endogenous beta-cell neogenesis.