Stem/progenitor cells hold promise for alleviating/curing type 1 diabetes due to the capacity to differentiate into functional insulin-producing cells. The current study aims to assess the differentiation potential of human pancreatic IPCs (islet-derived progenitor cells). IPCs were derived from four human donors and subjected to more than 2000-fold expansion before turning into ICCs (islet-like cell clusters). The ICCs expressed ISL-1 Glut2, PDX-1, ngn3, insulin, glucagon and somatostatin at the mRNA level and stained positive for insulin and glucagon by immunofluorescence. Following glucose challenge in vitro, C-peptide was detected in the sonicated ICCs, instead of in the conditioned medium. To examine the function of the cells in vivo, IPCs or ICCs were transplanted under the renal capsule of immunodeficient mice. One month later, 19 of 28 mice transplanted with ICCs and 4 of 14 mice with IPCs produced human C-peptide detectable in blood, indicating that the in vivo environment further facilitated the maturation of ICCs. However, among the hormone-positive mice, only 9 of 19 mice with ICCs and two of four mice with IPCs were able to secrete C-peptide in response to glucose.