Type 1 diabetes mellitus subjects millions to a daily burden of disease management, life threatening hypoglycemia and long-term complications such as retinopathy, nephropathy, heart disease, and stroke. Cell transplantation therapies providing a glucose-regulated supply of insulin have been implemented clinically, but are limited by safety, efficacy and supply considerations. Stem cells promise a plentiful and flexible source of cells for transplantation therapies. Here, we show that cells derived from human embryonic germ (EG) cells express markers of definitive endoderm, pancreatic and beta-cell development, glucose sensing, and production of mature insulin. These cells integrate functions necessary for glucose responsive regulation of preproinsulin mRNA and expression of insulin C-peptide in vitro. Following transplantation into mice, cells become insulin and C-peptide immunoreactive and produce plasma C-peptide in response to glucose. These findings suggest that EG cell derivatives may eventually serve as a source of insulin producing cells for the treatment of diabetes.