β-Cells derived from stem cells hold great promise for cell replacement therapy for diabetes. Here we examine the ability of nuclear transfer embryonic stem cells (NT-ESs) derived from a patient with type 1 diabetes to differentiate into β-cells and provide a source of autologous islets for cell replacement. NT-ESs differentiate in vitro with an average efficiency of 55% into C-peptide-positive cells, expressing markers of mature β-cells, including MAFA and NKX6.1. Upon transplantation in immunodeficient mice, grafted cells form vascularized islet-like structures containing MAFA/C-peptide-positive cells. These β-cells adapt insulin secretion to ambient metabolite status and show normal insulin processing. Importantly, NT-ES-β-cells maintain normal blood glucose levels after ablation of the mouse endogenous β-cells. Cystic structures, but no teratomas, were observed in NT-ES-β-cell grafts. Isogenic induced pluripotent stem cell lines showed greater variability in β-cell differentiation. Even though different methods of somatic cell reprogramming result in stem cell lines that are molecularly indistinguishable, full differentiation competence is more common in ES cell lines than in induced pluripotent stem cell lines. These results demonstrate the suitability of NT-ES-β-cells for cell replacement for type 1 diabetes and provide proof of principle for therapeutic cloning combined with cell therapy.