This unit describes our current knowledge regarding the isolation human bone marrow–derived progenitor cells for the paracrine stimulation of islet regeneration after transplantation into immunodeficient mouse models of diabetes. By using high aldehyde dehydrogenase (ALDHhi) activity, a conserved function in multiple stem cell lineages, a mixed population of hematopoietic, endothelial, and mesenchymal progenitor cells can be efficiently purified using flow cytometry. We describe in vitro approaches to characterize and expand these distinct cell types. Importantly, these cell types can be transplanted into immunodeficient mice rendered beta‐cell deficient by streptozotocin (STZ) treatment, in order monitor functional recovery from hyperglycemia and to characterize endogenous islet regeneration via paracrine mechanisms. Herein, we provide detailed protocols for: (1) isolation and characterization of ALDHhi cells for the establishment of hematopoietic and multipotent‐stromal progenitor lineages; (2) intravenous and intrapancreatic transplantation of human stem cell subtypes for the quantification of glycemic recovery in STZ‐treated immunodeficient mice; and (3) immunohistochemical characterization of islet recovery via the stimulation of islet neogenic, beta‐cell proliferative, and islet revascularization programs. Collectively, these systems can be used to support the pre‐clinical development of human progenitor cell–based therapies to treat diabetes via islet regeneration. Curr. Protoc. Stem Cell Biol. 26:2B.4.1‐2B.4.35. © 2013 by John Wiley & Sons, Inc.