Although stem cells are present in various adult tissues and body fluids, bone marrow has been the most popular source of stem cells for treatment of a wide range of diseases. Recent results for stem cells from adipose tissue have put it in a position to compete for being the leading therapeutic source. The major advantage of these stem cells over their counterparts is their amazing proliferative and differentiation potency. However, their pancreatic lineage transdifferentiation competence was not compared to that for bone marrow-derived stem cells. This study aims to identify an efficient source for transdifferentiation into pancreatic islet-like clusters, which would increase potential application in curative diabetic therapy. The results reveal that mesenchymal stem cells (MSC) derived from bone marrow and subcutaneous adipose tissue can differentiate into pancreatic islet-like clusters, as evidenced by their islet-like morphology, positive dithizone staining and expression of genes such as Nestin, PDX1, Isl 1, Ngn 3, Pax 4 and Insulin. The pancreatic lineage differentiation was further corroborated by positive results in the glucose challenge assay. However, the results indicate that bone marrow-derived MSCs are superior to those from subcutaneous adipose tissue in terms of differentiation into pancreatic islet-like clusters. In conclusion, bone marrow-derived MSC might serve as a better alternative in the treatment of diabetes mellitus than those from adipose tissue.