Pancreatic islets of Langerhans exhibit an architecture and cellular organization ideal for rapid, yet finely controlled, responses to changes in blood glucose levels. In type I, insulin-dependent diabetes (IDD), this organization is lost as a result of the progressive autoimmune response which selectively destroys the insulin-producing pancreatic β cells. Since β cells are perceived as end-stage differentiated cells having limited capacity for regeneration in situ, individuals with IDD resulting from β cell loss or dysfunction require life-long insulin therapy. Efforts to produce islet neogenesis or initiate islet growth in vitro from either fetal or adult tissue have had minimal success. We now report that pancreatic-derived, pluripotent islet-producing stem cells (IPSCs), isolated from prediabetic mice, can be grown in long-term cultures and differentiated into immature functional islet-like structures containing cells which express low levels of insulin, glucagon and/or somatostatin. When such in vitro grown islets were implanted into clinically diabetic NOD mice, the implanted mice were successfully weaned from insulin long-term (> 50 days) without ill effects. The implanted mice maintained blood glucose levels just above euglycemic (180-220 mg/dl) and showed no signs of disease. Thus, this technical breakthrough provides new therapeutic approaches to diabetes as an alternative to insulin therapy.