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Stem cell therapy for patients with diabetes mellitus is receiving great attention among scientists and clinicians. Although bone marrow is considered one of the rich sources of stem cells, its limited availability of donors precludes its use for all the suitable patients. Human umbilical cord blood mononuclear cells or its-derived mesenchymal cells are being increasingly used as an alternative source of stem cells for cell-based therapy for malignant and nonmalignant diseases. Human umbilical cord blood cells have low potential for graft-versus-host disease and tumorigenicity. Also, no immunosuppression is required. Experimental evidence has shown that human umbilical cord blood -derived stem cells can differentiate into insulin-secreting β-cells. Transplantation of Human umbilical cord blood cells has been shown to improve blood glucose levels, and ameliorate kidney as well as neuropathic complications in diabetic animal models. Although the first use of autologous Human umbilical cord blood transfusion in type 1 diabetic children had a short-term beneficial effect in reducing the daily requirement of insulin dose and the maintenance of near normoglycemia, subsequent studies have failed to show this beneficial effect. In this review, we will provide both experimental and clinical evidence in favor and against the beneficial effect of human umbilical cord blood cells and cord blood-derived mesenchymal cells in the management of diabetes mellitus.