Diabetes mellitus is a pandemic metabolic disorder that results from either the autoimmune destruction or the dysfunction of insulin-producing pancreatic beta cells. A promising cure is beta cell replacement through the transplantation of islets of Langerhans. However, donor shortage hinders the widespread implementation of this therapy. Human pluripotent stem cells, including embryonic stem cells and induced pluripotent stem cells, represent an attractive alternative beta cell source for transplantation. Although major advances over the past two decades have led to the generation of stem cell-derived beta-like cells that share many features with genuine beta cells, producing fully mature beta cells remains challenging. Here, we review the current status of beta cell differentiation protocols and highlight specific challenges that are associated with producing mature beta cells. We address the challenges and opportunities that are offered by monogenic forms of diabetes. Finally, we discuss the remaining hurdles for clinical application of stem cell-derived beta cells and the status of ongoing clinical trials.