In 1998, the landmark paper describing the isolation and culture of human embryonic stem cells (ESCs) was published. Since that time, the main goal of many diabetes researchers has been to derive β cells from ESCs as a renewable cell-based therapy for the treatment of patients with diabetes. In working toward this goal, numerous protocols that attempt to recapitulate normal pancreatic development have been published that result in the formation of pancreatic cell types from human pluripotent cells. This review examines stem cell differentiation methods and places them within the context of pancreatic development. We additionally compare strategies that are currently being used to generate pancreatic cell types and contrast them with approaches that have been used to generate functional cell types in different lineages. In doing this, we aim to identify how new approaches might be used to improve yield and functionality of in vitro–derived pancreatic β cells as an eventual cell-based therapy for type 1 diabetes.