Abstract-Diabetes mellitus is a high incidence disease that has increased rapidly in recent years. Many new therapies are being studied and developed in order to find an effective treatment. An ideal candidate is stem cell therapy. In this study, we investigated the differentiation of adipose derived stem cells (ADSCs) into pseudo-islets in defined medium in vitro, to produce large quantities of insulin-producing cells (IPCs) for transplantation. ADSCs isolated from adipose tissue were induced to differentiate into islet-like insulin-producing cell clusters in vitro by inducing medium DMEM/F12 containing nicotinamide, N2, B27, bFGF, and insulin-transferrin-selenite (ITS). Differentiated cells were analyzed for properties of IPCs, including storage of Zn 2+ by dithizone staining, insulin production by ELISA and immunochemistry, and beta cell-related gene expression by reverse transcriptase PCR. The results showed that after 2 weeks of differentiation, the ADSCs aggregated into cell clusters, and after 4 weeks they formed islets, 50-400 micrometers in diameter. These islet cells exhibited characteristics of pancreatic beta cells as they were positive for dithizone staining, expressed insulin in vitro and C-peptide in the cytoplasm, and expressed pancreatic beta cellspecific genes, including Pdx-1, NeuroD, and Ngn3. These results demonstrate that ADSCs can be used to produce a large number of functional islets for research as well as application.