Diabetes is a metabolic disease which affects not only glucose metabolism but also lipid and protein metabolism. It encompasses two major types: type 1 and 2 diabetes. Despite the different etiologies of type 1 and 2 diabetes mellitus (T1DM and T2DM, respectively), the defining features of the two forms are insulin deficiency and resistance, respectively. Stem cell therapy is an efficient method for the treatment of diabetes, which can be achieved by differentiating pancreatic β-like cells. The consistent generation of glucose-responsive insulin releasing cells remains challenging. In this review article, we present basic concepts of pancreatic organogenesis, which intermittently provides a basis for engineering differentiation procedures, mainly based on the use of small molecules. Small molecules are more auspicious than any other growth factors, as they have unique, valuable properties like cell-permeability, as well as a nonimmunogenic nature; furthermore, they offer immense benefits in terms of generating efficient functional beta-like cells. We also summarize advances in the generation of stem cell-derived pancreatic cell lineages, especially endocrine β-like cells or islet organoids. The successful induction of stem cells depends on the quantity and quality of available stem cells and the efficient use of small molecules.