Over the past decades, tremendous efforts have been made to establish pancreatic islet transplantation as a standard therapy for type 1 diabetes. Recent advances in islet transplantation have resulted in steady improvements in the 5-year insulin independence rates for diabetic patients. Here we review the key challenges encountered in the islet transplantation field which include islet source limitation, sub-optimal engraftment of islets, lack of oxygen and blood supply for transplanted islets, and immune rejection of islets. Additionally, we discuss possible solutions for these challenges.