Whole pancreas or beta-cell transplantation has opened the way for the treatment of advanced stage of diabetes mellitus. However, it is always limited by the scarcity of transplantation materials. The amniotic membrane is part of the fetal membrane and is composed of amniotic epithelium (HAE) and mesenchymal (HAM) cells that are derived from the inner cell mass in the blastocyst. Thus, HAE and HAM cells may have the potential to differentiate into various organs. The aim of our study was to assess the possibility of HAE cells differentiating into insulin-producing cells. In vitro, HAE cells stimulated with nicotinamide induced insulin mRNA in the culture cells. In vivo, HAE cells were capable of normalizing the blood glucose level of diabetic mice after several weeks of implantation into streptozotocin-induced diabetic mice. The distribution of human cells and human insulin secretion in mouse tissue studied by immunohistochemistry for anti-human-specific beta-2-microglobulin and anti-human-specific insulin shows the same location in mouse tissue. These studies suggest that HAE cells have the potential to differentiate into beta-cells in vivo, and hence that HAE cells have therapeutic potential for the treatment of type I diabetes mellitus.