COVID‐19 disease, caused by severe acute respiratory syndrome coronavirus 2 (SARS‐CoV‐2), has led to enormous morbidity and mortality worldwide. After gaining entry into the human host, the virus initially infects the upper and lower respiratory tract, subsequently invading multiple organs, including the pancreas. While on one hand, diabetes mellitus (DM) is a significant risk factor for severe COVID‐19 infection and associated death, recent reports have shown the onset of DM in COVID‐19‐recovered patients. SARS‐CoV‐2 infiltrates the pancreatic islets and activates stress response and inflammatory signaling pathways, impairs glucose metabolism, and consequently leads to their death. Indeed, the pancreatic autopsy samples of COVID‐19 patients reveal the presence of SARS‐CoV‐2 particles in β‐cells. The current review describes how the virus enters the host cells and activates an immunological response. Further, it takes a closer look into the interrelationship between COVID‐19 and DM with the aim to provide mechanistic insights into the process by which SARS‐CoV‐2 infects the pancreas and mediates dysfunction and death of endocrine islets. The effects of known anti‐diabetic interventions for COVID‐19 management are also discussed. The application of mesenchymal stem cells (MSCs) as a future therapy for pancreatic β‐cells damage to reverse COVID‐19‐induced DM is also emphasized.