β-cell replacement represents a promising approach for the treatment of type I diabetes, but is limited by donor shortage and recurring autoimmunity. Stem and progenitor cells, which can be expanded and differentiated in vitro, may offer an abundant source of cells for transplantation. The difficulty of expanding mature β cells and their pancreatic precursors has turned the attention to the potential of cells from other tissues to function as surrogate β cells. Recent research has shown that cells from a number of tissues can be induced to produce, process, and store insulin, release it in response to physiologic signals, and replace β-cell function in rodents. The change in cell phenotype has been induced by dominant transcription factor genes ectopically expressed in the cells, or following cell exposure to differentiation factors in vitro or in vivo. Propagation of these cells in tissue culture provides an opportunity for further modifying them to enhance their resistance to immune destruction.