β-cell replacement may efficiently cure type 1 diabetic (T1D) patients whose insulin-secreting β-cells have been selectively destroyed by autoantigen-reactive T cells. To generate insulin-secreting cells we used two cell sources: rat multipotent adult progenitor cells (rMAPC) and the highly similar rat extra-embryonic endoderm precursor (rXEN-P) cells isolated under rMAPC conditions from blastocysts (rHypoSC). rMAPC/rHypoSC were sequentially committed to definitive endoderm, pancreatic endoderm, and β-cell like cells. On day 21, 20% of rMAPC/rHypoSC progeny expressed Pdx1 and C-peptide. rMAPCr/HypoSC progeny secreted C-peptide under the stimulus of insulin agonist carbachol, and was inhibited by the L-type voltage-dependent calcium channel blocker nifedipine. When rMAPC or rHypoSC differentiated d21 progeny were grafted under the kidney capsule of streptozotocin-induced diabetic nude mice, hyperglycemia reversed after 4 weeks in 6/10 rMAPC- and 5/10 rHypoSC-transplanted mice. Hyperglycemia recurred within 24 hours of graft removal and the histological analysis of the retrieved grafts revealed presence of Pdx1-, Nkx6.1- and C-peptide-positive cells. The ability of both rMAPC and HypoSC to differentiate to functional β-cell like cells may serve to gain insight into signals that govern β-cell differentiation and aid in developing culture systems to commit other (pluripotent) stem cells to clinically useful β-cells for cell therapy of T1D.