Abstract: Diabetes mellitus, a metabolic disease that seriously threatens human health, imposes a heavy burden on individuals and society. Therefore, research into its pathogenesis and treatment modalities is an important direction that aligns with national healthcare development strategies. Islet transplantation holds broad prospects for functionally curing diabetes, but conventional islet transplantation is difficult to popularize on a large scale due to limitations, such as donor shortage and early graft loss. In recent years, stem cell–derived therapies have emerged as a new research focus in this field. Chemically induced pluripotent stem cells, personalized endodermal stem cell–derived islet technologies, and autologous islet transplantation from adult pancreatic progenitor cells have addressed the problem of insufficient donors. Meanwhile,the application of novel transplant sites, such as the subrectus sheath, provides a more sufficient space and vascularized environment for grafts, significantly reducing the risk of graft loss and improving functional stability. To mitigate immune rejection, new optimization strategies have also been developed to lessen the treatment limitations caused by immune attack, including islet encapsulation and co-transplantation with immunomodulatory cells. This review will elaborate on the progress of islet cell transplantation in treating diabetes mellitus from the perspectives of islet cell sources, transplantation sites, immune regulation mechanisms, and clinical efficacy evaluation.