Advances and improvements in mesenchymal stromal/stem cells (MSCs) and cell replacement therapies have been promising approaches to treat diabetes mellitus (DM) since their potent capacities for differentiation into various functional cells match the demands of tissue repair and regeneration. The aim of this study is to examine the effects of nano-sized type I collagen molecules in combination with nicotinamide (NCT) and exendin-4 (EX4) on MSC differentiation into insulin-secreting cells in vitro and to evaluate their reparative effects against type 2 diabetes mellitus (T2DM) in vivo. Differentiation of MSCs in the presence of NCT, nano-sized type I collagen molecules and EX4 was represented with insulin production and Nkx6.1/PDX-1 mRNA expression assessed by insulin secretion assay and quantitative RT-PCR. Histopathological and glycosylated haemoglobin (HbA1) analysis was performed to assess reparative effects against T2DM in the rat model. The results revealed that MSCs showed increased differentiation into insulin-secreting cells with higher mRNA expression for Nkx6.1 and early PDX-1 in the presence of NCT and nano-sized type I collagen molecules. Addition of nano-sized type I collagen fibrils increased morphologically islet-like clusters in differentiated cells. T2DM rats reverted to their normal HbA1 values and exhibited structurally repaired islets in the pancreas implanted with NCT/nano-sized collagen I molecule/EX4-incubated differentiated cells. In short, the combined recipe showed reparative actions on the destructive islet of Langerhans in the pancreas coupled with glucoregulatory effects in T2DM rats in vivo. Therefore, MSCs incubated with NCT/EX4 and nano-sized collagen I molecules could be a potential therapy for retrieval of destructed islets and could efficiently regulate blood glucose in T2DM.