The strategy to differentiate stem cells into insulin producing cells (IPCs) in vitro is a promising one to get a cell source for β-cell replacement therapy of diabetes. Bone marrow stem cells (BMSc) have the capacity to differentiate into various cell lineages including endocrine cells of pancreas. Herein, full characterization of insulin producing cells derived from adult bone marrow hematopoietic stem cells (HSCs) was studied. HSCs were obtained from the long bones of Sprague Dawley (SD) rats and differentiated into insulin producing cells by using DMSO and pancreatic extract. The differentiated HSCs were distinctly stained crimson red by DTZ and expressed insulin, glucagon, somatostatin and endocrine-specific transcription genes. Immunocytochemistry and Immunofluorescence revealed that the differentiated HSCs were positively stained for insulin and c-peptide. These results were confirmed by flow cytometric analysis, that they were positively stained for insulin. Enzyme-linked immunosorbent assay analysis demonstrated that insulin was secreted in a dose- response fashion as a function of increasing glucose concentrations. These findings suggest that HSCs can differentiate into insulin producing cells similar to the islets of langerhans and could be used for the treatment of diabetes.