Diabetes has increasingly become a worldwide health problem, causing huge burden on healthcare system and economy. Type 1 diabetes (T1D), traditionally termed “juvenile diabetes” because of an early onset age, is affecting 5~10% of total diabetic population. Insulin injection, the predominant treatment for T1D, is effective to ameliorate the hyperglycemia but incompetent to relieve the autoimmunity and to regenerate lost islets. Islet transplantation, an experimental treatment for T1D, also suffers from limited supply of human islets and poor immunosuppression. The recent progress in regenerative medicine, especially stem cell therapy, has suggested several novel and potential cures for T1D. Mesenchymal stem cell (MSC) based cell therapy is among one of them. MSCs are a type of adult stem cells residing in bone marrow, adipose tissue, umbilical cord blood, and many other tissues. MSCs, with self-renewal potential and transdifferentiation capability, can be expanded in vitro and directed to various cell lineages with relatively less efforts. MSCs have well-characterized hypoimmunogenicity and immunomodulatory effect. All these features make MSCs attractive for treating T1D. Here, we review the properties of MSCs and some of the recent progress using MSCs as a new therapeutic in the treatment of T1D. We also discuss the strength and limitations of using MSC therapy in human trials.