Diabetes mellitus is becoming more common worldwide which is a health risk, leading to significant morbidity and mortality. Despite advancements in pharmacotherapy and lifestyle modifications, managing diabetes remains a challenge due to its complex pathophysiology and associated complications. Stem cell treatment has become a potentially approach to a diabetes treatment, offering the potential to regenerate pancreatic beta cells, modulate immune responses, and improve tissue repair. This review article provides an overview of the current understanding of diabetes mellitus, discusses the mechanisms of action of various types of stem cells, and evaluates preclinical and clinical evidence supporting their therapeutic potential. Challenges such as immune rejection, tumorigenicity, and regulatory hurdles are addressed, along with future directions in stem cell therapy, including personalized medicine approaches and combination therapies. By highlighting the opportunities and obstacles in stem cell therapy for diabetes, this review aims to guide future research efforts toward developing safe, effective, and accessible treatments for diabetic patients worldwide.