Insufficient pancreatic beta-cell mass is fundamental to the pathogenesis of both types 1 and 2 diabetes and constitutes the basis for the goal of beta-cell replacement therapy. Current methods for isolating islets from organ donor pancreases do not come close to supplying all in need, thus providing a compelling need to find new sources of insulin-producing cells. Possible sources include generation of cells from embryonic stem cells (ESC), adult stem/precursor cells, transdifferentiation of other cell types and xenodonors. Bioengineering can be used to improve secretory performance and strengthen cells to better withstand the challenges of transplantation. Strategies include protection against hypoxia, inflammation, and immune attack.