Type 1 diabetes mellitus (T1DM) is an autoimmune disease that destroys insulin-producing pancreatic β-cells. Insulin replacement therapy is currently the mainstay of treatment for T1DM; however, treatment with insulin does not ameliorate disease progression, as dysregulated immune response and inflammation continue to cause further pancreatic β-cell degradation. Therefore, shifting therapeutic strategies toward immunomodulating approaches could be effective to prevent and reverse disease progression. Different immune-modulatory therapies could be used, e.g., monoclonal-based immunotherapy, mesenchymal stem cell, and immune cell therapy. Since immune-modulatory approaches could have a systemic effect on the immune system and cause toxicity, more specific treatment options should target the immune response against pancreatic β-cells. In this regard, chimeric antigen receptor (CAR)-based immunotherapy could be a promising candidate for modulation of dysregulated immune function in T1DM. CAR-based therapy has previously been approved for a number of hematologic malignancies. Nevertheless, there is renewed interest in CAR T cells' " off-the-shelf " treatment for T1DM. Several pre-clinical studies demonstrated that redirecting antigen-specific CAR T cells, especially regulatory CAR T cells (CAR Tregs), toward the pancreatic β-cells, could prevent diabetes onset and progression in diabetic mice models. Here, we aim to review the current progress of CAR-based immune-cell therapy for T1DM and the corresponding challenges, with a special focus on designing CAR-based immunomodulatory strategies to improve its efficacy in the treatment of T1DM.