Recent studies reported that pancreatic β-cells are heterogeneous in terms of their transcriptional profiles and their abilities for insulin secretion. Sub-populations of pancreatic β-cells have been identified based on the functionality and expression of specific surface markers. Under diabetes condition, β-cell identity is altered leading to different β-cell sub-populations. Furthermore, cell–cell contact between β-cells and other endocrine cells within the islet play an important role in regulating insulin secretion. This highlights the significance of generating a cell product derived from stem cells containing β-cells along with other major islet cells for treating patients with diabetes, instead of transplanting a purified population of β-cells. Another key question is how close in terms of heterogeneity are the islet cells derived from stem cells? In this review, we summarize the heterogeneity in islet cells of the adult pancreas and those generated from stem cells. In addition, we highlight the significance of this heterogeneity in health and disease conditions and how this can be used to design a stem cell-derived product for diabetes cell therapy.