Type 1DM (T1DM) accounts for 10% of diabetic patients. Exogenous insulin therapy is needed to maintain euglycemia. Replacement of β cells by allogeneic transplantation of the whole pancreas or by pancreatic islets can provide an alternative therapy. Advances achieved with islet transplantation are restricted by the scarce availability of organ donors and the need for immunosuppression. The potential for the generation of insulin-producing cells (IPCs) from a variety of stem cell sources have emerged as a promising avenue. To this end, the use of pluripotent stem cells is increasingly reported. A 4-stage differentiation protocol was developed to obtain pancreatic endocrine progenitor cells, which undergo further differentiation in vivo to form pancreatic polyhormonal cells. A seven-stage differentiation protocol would produce fully mature β-cells. However, in view of the immunogenicity and potential for tumorigenicity, the use of pluripotent stem cells, encapsulation, and/or immunosuppression is required. Mesenchymal stromal/stem cells (MSCs) are immunoevasive and have an immunomodulatory function. Evidence has been provided that a subpopulation of 15–20% of MSCs could be differentiated into IPCs. Their transplantation into humanized mice did not provoke an allogeneic immune response. The downside of clinical application of MSCs is their heterogeneity, which is dependent on their source and donor-to-donor variability. The use of extracellular vesicles (EVs) as an alternative to cell therapy can provide several advantages. EVs are administered intravenously, and their administration can be repeated. EVs do not replicate, lack the potential for tumorigenesis, and can be stored and used as an off-the-shelf therapeutic tool. EVs derived from naïve MSCs (uneducated) can be used for cases with early-onset T1DM to exploit their immunomodulatory functions. For patients without a meal-stimulated C-peptide response, the use of “educated” EVs derived from IPCs is being explored. As our knowledge and experience in this field are exponentially increasing, it will not be long before optimization of therapy for T1DM by IPCs or EVs becomes clinically available and reliable, provided that their outcomes are better than the ever-improving closed-circuit insulin pumps.