Diabetes is a disease that affects millions and causes a major burden on the health care system. Type 1 diabetes has traditionally been managed with exogenous insulin therapy, however factors such as cost, lifestyle restriction, and life threatening complications necessitate the development of a more efficient treatment alternative. Pancreas transplantation, and more recently transplant of purified pancreatic islets, has offered the potential for independence from insulin injections. Islet transplantation is gaining acceptance as it has been shown to be effective for certain patients with type 1 diabetes. One obstacle, however, is the fact that there is an inadequate supply of cadaveric human islets to implement this procedure on a widespread clinical basis. A promising source of transplantable islets in the future will come through the use of adult or embryonic stem cells. This chapter presents an overview of the advancements made in the development of a stem cell based application to islet transplantation. Advantages and limitations are discussed regarding the use of embryonic stem cells, adult pancreatic stem/progenitor cells, and the use of nonpancreatic tissues based on current experimental models in the literature. It is concluded that stem cells offer the greatest potential for the development of an abundant source of pancreatic islets, although specific obstacles must be overcome before this can become a reality.