hESC (human embryonic stem cells), when differentiated into pancreatic β ILC (islet-like clusters), have enormous potential for the cell transplantation therapy for Type 1 diabetes. We have developed a five-step protocol in which the EBs (embryoid bodies) were first differentiated into definitive endoderm and subsequently into pancreatic lineage followed by formation of functional endocrine β islets, which were finally matured efficiently under 3D conditions. The conventional cytokines activin A and RA (retinoic acid) were used initially to obtain definitive endoderm. In the last step, ILC were further matured under 3D conditions using amino acid rich media (CMRL media) supplemented with anti-hyperglycaemic hormone-Glp1 (glucagon-like peptide 1) analogue Liraglutide with prolonged t½ and Exendin 4. The differentiated islet-like 3D clusters expressed bonafide mature and functional β-cell markers-PDX1 (pancreatic and duodenal homoeobox-1), C-peptide, insulin and MafA. Insulin synthesis de novo was confirmed by C-peptide ELISA of culture supernatant in response to varying concentrations of glucose as well as agonist and antagonist of functional 3D β islet cells in vitro. Our results indicate the presence of almost 65% of insulin producing cells in 3D clusters. The cells were also found to ameliorate hyperglycaemia in STZ (streptozotocin) induced diabetic NOD/SCID (non-obese diabetic/severe combined immunodeficiency) mouse up to 96 days of transplantation. This protocol provides a basis for 3D in vitro generation of long-term in vivo functionally viable islets from hESC.