Ductal structures of the adult pancreas contain stem cells that differentiate into islets of Langerhans. Here, we grew pancreatic ductal epithelial cells isolated from prediabetic adult non-obese diabetic mice in long-term cultures, where they were induced to produce functioning islets containing α, β and δ cells. These in vitro-generated islets showed temporal changes in mRNA transcripts for islet cell-associated differentiation markers, responded in vitro to glucose challenge, and reversed insulin-dependent diabetes after being implanted into diabetic non-obese diabetic mice. The ability to control growth and differentiation of islet stem cells provides an abundant islet source for β-cell reconstitution in type I diabetes.