The nonobese diabetic (NOD) mouse is a classical animal model for autoimmune type 1 diabetes (T1D), closely mimicking features of human T1D. Thus, the NOD mouse presents an opportunity to test the effectiveness of induced pluripotent stem cells (iPSCs) as a therapeutic modality for T1D. Here, we demonstrate a proof of concept for cellular therapy using NOD mouse-derived iPSCs (NOD-iPSCs). We generated iPSCs from NOD mouse embryonic fibroblasts or NOD mouse pancreas-derived epithelial cells (NPEs), and applied directed differentiation protocols to differentiate the NOD-iPSCs toward functional pancreatic beta cells. Finally, we investigated whether the NPE-iPSC-derived insulin-producing cells could normalize hyperglycemia in transplanted diabetic mice. The NOD-iPSCs showed typical embryonic stem cell-like characteristics such as expression of markers for pluripotency, in vitro differentiation, teratoma formation, and generation of chimeric mice. We developed a method for stepwise differentiation of NOD-iPSCs into insulin-producing cells, and found that NPE-iPSCs differentiate more readily into insulin-producing cells. The differentiated NPE-iPSCs expressed diverse pancreatic beta cell markers and released insulin in response to glucose and KCl stimulation. Transplantation of the differentiated NPE-iPSCs into diabetic mice resulted in kidney engraftment. The engrafted cells responded to glucose by secreting insulin, thereby normalizing blood glucose levels. We propose that NODiPSCs will provide a useful tool for investigating genetic susceptibility to autoimmune diseases and generating a cellular interaction model of T1D, paving the way for the potential application of patient-derived iPSCs in autologous beta cell transplantation for treating diabetes.