Type 1 diabetes (T1D) is a deficiency in insulin production which is mainly due to loss of β-cell pancreatic islets. Patients with T1D need to be given exogenous insulin regularly. While improvements in the delivery of insulin and glucose monitoring methods have been effective in improving patient safety, insulin therapy is not a cure and is often associated with complications and debilitating hypoglycaemic episodes. Meanwhile, pancreas or islet transplantation as a gold standard only promises temporary freedom from exogenous insulin and suffers from issues of its own. Stem cell therapy may provide a more permanent solution, given stem cells’ immunomodulatory characteristics and ability to self-renew and distinguish into specific cells. In this sense, the therapeutic potentials of stem cells are addressed in this study. These stem cells cover a wide range of treatments for T1D including embryonic stem cells, induced pluripotent stem cells, bone-marrow derived hematopoietic stem cells and multipotent mesenchymal stromal cells. The challenges faced by the current stem cell transplant in T1D treatment and Islamic viewpoints regarding ethics in stem cell research and therapy are also discussed. In conclusion, stem cell therapy offers a safe and efficient alternative treatment for T1D. However, besides the fatwa from Fatwa Committee of Selangor, the lack of Malaysian stem cells ethics should be further addressed.