The pancreas arises from Pdx1-expressing progenitors in developing foregut 
endoderm in early embryo. Expression of Ngn3 and NeuroD1 commits the cells to 
form endocrine pancreas, and to differentiate into subsets of cells that 
constitute islets of Langerhans. β-cells in the islets transcribe gene-encoding 
insulin, and subsequently process and secrete insulin, in response to 
circulating glucose. Dysfunction of β-cells has profound metabolic consequences 
leading to hyperglycemia and diabetes mellitus. β-cells are destroyed via 
autoimmune reaction in type 1 diabetes (T1D). Type 2 diabetes (T2D), 
characterized by impaired β-cell functions and reduced insulin sensitivity, 
accounts for 90% of all diabetic patients. Islet transplantation is a promising 
treatment for T1D. Pluripotent stem cells provide an unlimited cell source to 
generate new β-cells for patients with T1D. Furthermore, derivation of induced 
pluripotent stem cells (iPSCs) from patients captures "disease-in-a-dish" for 
autologous cell replacement therapy, disease modeling, and drug screening for 
both types of diabetes. This review highlights essential steps in pancreas 
development, and potential stem cell applications in cell regeneration therapy 
for diabetes mellitus.