Human induced pluripotent stem cells (HiPSCs) appear to be highly similar to human embryonic stem cells (HESCs). Using two genetic lineage-tracing systems, we demonstrate the generation of iPSC lines from human pancreatic islet beta cells. These reprogrammed cells acquired markers of pluripotent cells and differentiated into the three embryonic germ layers. However, the beta cell-derived iPSCs (BiPSCs) maintained open chromatin structure at key beta-cell genes, together with a unique DNA methylation signature that distinguishes them from other PSCs. BiPSCs also demonstrated an increased ability to differentiate into insulin-producing cells both in vitro and in vivo, compared with ESCs and isogenic non-beta iPSCs. Our results suggest that the epigenetic memory may predispose BiPSCs to differentiate more readily into insulin producing cells. These findings demonstrate that HiPSC phenotype may be influenced by their cells of origin, and suggest that their skewed differentiation potential may be advantageous for cell replacement therapy.