Aim. Stem cell therapy is one of the upcoming therapies for the treatment of diabetes. Discovery of potent differentiating agents is a prerequisite for increasing islet mass. The present study is an attempt to screen the potential of novel small biomolecules for their differentiating property into pancreatic islet cells using NIH3T3, as representative of extra pancreatic stem cells/progenitors. Methods. To identify new agents that stimulate islet differentiation, we screened various compounds isolated from Enicostemma littorale using NIH3T3 cells and morphological changes were observed. Characterization was performed by semiquantitative RT-PCR, Q-PCR, immunocytochemistry, immunoblotting, and insulin secretion assay for functional response in newly generated islet-like cell clusters (ILCC). Reversal of hyperglycemia was monitored after transplanting ILCC in STZ-induced diabetic mice. Results. Among various compounds tested, swertisin, an isolated flavonoid, was the most effective in differentiating NIH3T3 into endocrine cells. Swertisin efficiently changed the morphology of NIH3T3 cells from fibroblastic to round aggregate cell cluster in huge numbers. Dithizone (DTZ) stain primarily confirmed differentiation and gene expression studies signified rapid onset of differentiation signaling cascade in swertisin-induced ILCC. Molecular imaging and immunoblotting further confirmed presence of islet specific proteins. Moreover, glucose induced insulin release (in vitro) and decreased fasting blood glucose (FBG) (in vivo) in transplanted diabetic BALB/c mice depicted functional maturity of ILCC. Insulin and glucagon expression in excised islet grafts illustrated survival and functional integrity. Conclusions. Rapid induction for islet differentiation by swertisin, a novel herbal biomolecule, provides low cost and readily available differentiating agent that can be translated as a therapeutic tool for effective treatment in diabetes.