Diabetes mellitus results from inadequate mass of insulin-producing pancreatic beta cells. Type 1 diabetes is characterized by absolute loss of beta cells due to autoimmune-mediated destruction. Type 2 diabetes is characterized by relative deficiency of beta cells due to lack of compensation for insulin resistance. Restoration of deficient beta cell mass by transplantation from exogenous sources or by endogenous regeneration of insulin-producing cells would be therapeutic options. Mature beta cells have an ability to proliferate; however, it has been shown to be difficult to expand adult beta cells in vitro. Alternatively, regeneration of beta cells from embryonic and adult stem cells and pancreatic progenitor cells is an attractive method to restore islet cell mass. With information obtained from the biology of pancreatic development, direct differentiation of stem and progenitor cells toward a pancreatic beta cell phenotype has been tried using various strategies, including forced expression of beta cell-specific transcription factors. Further research is required to understand how endogenous beta cells differentiate and to develop methods to regenerate beta cells for clinically applicable therapies for diabetes.