Islet cell transplantation has therapeutic potential to cure type 1 diabetes (T1D), which is characterized by autoimmune-mediated destruction of insulin-producing β cells. However, current success rates are limited by long-term decline in islet graft function resulting partially from poor revascularization and immune destruction. Mesenchymal stem cells (MSCs) have the potential to enhance islet transplantation and prevent disease progression by a multifaceted approach. MSCs have been shown to be effective at inhibiting inflammatory-mediated immune responses and at promoting tissue regeneration. The immunomodulatory and tissue repairing properties of MSCs may benefit β cell regeneration in the context of T1D. This review will elucidate how MSCs can minimize β cell damage by providing survival signals and simultaneously modulate the immune response by inhibiting activation, and proliferation of several immune cell types. In addition, MSCs can enhance islet graft revascularization, maintaining long-term β cell viability and function.