Background : The difficulty in achieving tight glucose control using exogenous insulin has led to an increased focus on pancreas transplantation as therapy for type 1 diabetes mellitus. Recent studies have demonstrated the feasibility of generating insulin producing cells obtained from progenitor cells of various cellular sources including adult and embryonic stem cells of mouse and human origin .Objectives : To demonstrate the potential for cell based therapy of diabetes mellitus involving the generation of insulin-producing cells from bone marrow derived stem cells. This study attempted to demonstrate that adult stem cells be induced to transdifferentiate into insulin-secreting beta islet cells and to explain the optimum culture conditions needed to achieve this transdifferentiation .Methods : In this present study, we isolated Umbilical Cord Blood (5 samples) and Bone Marrow (10 samples) stem cells that were subsequently induced to transdifferentiate into insulin-producing cells under culture conditions containing high concentrations of glucose and the addition of ß cell stimulating factors. The functionality of these cells was confirmed by insulin production .