Type 1 diabetes mellitus is caused by autoimmune destruction of insulin-producing beta cells. The major obstacle to transplantation of insulin-producing cells to cure the disease is the limited source of these cells. To overcome this problem, we describe here a multistep protocol for generation of insulin-producing islet-like clusters from human adipose tissue-derived stromal cells (ADSCs). Analysis using reverse transcription polymerase chain reaction detected enhanced expression of various pancreatic genes during the differentiation of ADSCs. Immunofluorescence analysis revealed functional similarities between cells derived from ADSCs and pancreatic islet cells, i.e., the presence of insulin- and C-peptide-coexpressing cells in the clusters and glucagon expression on the cell surface. The glucose challenge tests revealed the production of insulin, and such production was regulated via physiological signaling pathways. Our insulin-producing cells derived from ADSCs could be potentially used for cell therapy of type 1 diabetes mellitus.