Type I diabetes (T1D) is a chronic autoimmune disease caused by pancreatic β-cell destruction induced by autoantibodies and autoreactive T cells. After significant reduction of the β-cell mass, diabetes sets in and can cause significant complications. It is estimated that more than 3 million Americans have T1D, and its prevalence among young individuals is progressively rising; however, the reasons for this increase are not known. Islet transplantation is recognized as the ultimate cure for T1D, but unfortunately, the severe scarcity of available islets makes it necessary to establish alternative sources of β-cells. Our lab seeks to establish human-induced pluripotent stem cells as an unlimited, novel source of insulin-producing cells (IPCs) that are patient-specific, obviating the requirement for immunosuppression. Although several reports have emerged demonstrating successful derivation of IPCs from human pluripotent stem cells, the efficiencies of derivation are inadequate and these IPCs do not respond to glucose stimulation in vitro. We reasoned that the use of a growth factor sequestering bioscaffold and promotion of cell-cell signaling through 3D clustering would enhance the generation of functionally superior IPCs compared to those derived by 2D differentiation. Here, we discuss a novel 3D platform for the generation of highly efficient human IPCs.