Type 1 diabetes is a chronic disorder characterized by the destruction of pancreatic islet beta-cells through autoimmune assault. Insulin replacement is the current main therapeutic approach. In recent years, several studies have showed that mesenchymal stem cells (MSCs) transplantation can improve the metabolic profiles of diabetic animal models. However the exact mechanisms of reversing hyperglycemia remain to be elusive. Trans-differentiation of MSCs into insulin-producing cells (IPCs) has ever been regarded as the main mechanism. But other reports have contradicted these findings and it is difficult to explain the timing and extent of improvement by only the effect through trans-differentiation. Researches have found that MSCs naturally produce a variety of cytokines and growth factors, promoting the survival of surrounding cells, called as paracrine mechanisms. Paracrine effects have been proved to play an important role in tissue regeneration and repair in recent researches. Therefore we speculate that MSCs transplantation into diabetic animals may prevent apoptosis of injured pancreatic beta cells and enhance regeneration of endogenous progenitor cells through paracrine actions such as angiogenic, cytoprotective, anti-inflammatory, mitogenic and anti-apoptotic effects. This hypothesis, if proved to be valid, may represent an important breakthrough in developing effective molecular or genetic therapeutics for diabetes.