Human pancreatic islet transplantation is a prospective curative treatment for diabetes. However, the lack of donor pancreases greatly limits this approach. One approach to overcome the limited supply of donor pancreases is to generate functional islets from human embryonic stem cells (hESCs), a cell line with unlimited proliferative capacity, through rapid directed differentiation. This study investigated whether pancreatic insulin-producing cells (IPCs) differentiated from hESCs could correct hyperglycemia in severe combined immunodeficient (SCID)/non-obese diabetic (NOD) mice, an animal model of diabetes. We generated pancreatic IPCs from two hESC lines, YT1 and YT2, using an optimized four-stage differentiation protocol in a chemically defined culture system. Then, about 5-7 × 10(6) differentiated cells were transplanted into the epididymal fat pad of SCID/NOD mice (n = 20). The control group were transplanted with undifferentiated hESCs (n = 6). Graft survival and function were assessed using immunohistochemistry, and measuring serum human C-peptide and blood glucose levels. The pancreatic IPCs were generated by the four-stage differentiation protocol using hESCs. About 17.1% of differentiated cells expressed insulin, as determined by flow cytometry. These cells secreted insulin/C-peptide following glucose stimulation, similarly to adult human islets. Most of these IPCs co-expressed mature β cell-specific markers, including human C-peptide, GLUT2, PDX1, insulin, and glucagon. After implantation into the epididymal fat pad of SCID/NOD mice, the hESC-derived pancreatic IPCs corrected hyperglycemia for ≥ 8 weeks. None of the animals transplanted with pancreatic IPCs developed tumors during the time. The mean survival of recipients was increased by implanted IPCs as compared to implanted undifferentiated hESCs (P<0.0001). The results of this study confirmed that human terminally differentiated pancreatic IPCs derived from hESCs can correct hyperglycemia in SCID/NOD mice for ≥8 weeks.