It was recently reported that pluripotent mesenchymal stem cells (MSCs) in rodent bone marrow (BM) have the capacity to generate insulin-producing cells (IPCs) in vitro. However, little is known about this capacity in human BM-MSCs. We developed a nongenetic method to induce human BM-MSCs to transdifferentiate into IPCs both phenotypically and functionally. BM-MSCs from 12 human donors were sequentially cultured in specially defined conditions. Their differentiation extent toward beta-cell phenotype was evaluated systemically. Specifically, after induction human BM-MSCs formed spheroid islet-like clusters containing IPCs, which was further confirmed by dithizone (DTZ) staining and electron microscopy. These IPCs expressed multiple genes related to the development or function of pancreatic beta cells (including NKX6.1, ISL-1, Beta2/Neurod, Glut2, Pax6, nestin, PDX-1, ngn3, insulin and glucagon). The coexpression of insulin and c-peptide was observed in IPCs by immunofluorescence. Moreover, they were able to release insulin in a glucose-dependent manner and ameliorate the diabetic conditions of streptozotocin (STZ)-treated nude mice. These results indicate that human BM-MSCs might be an available candidate to overcome limitations of islet transplantation.