Type 2 diabetes mellitus (T2DM) is a chronic disease with a high incidence in China. It occurs due to a relative lack of insulin because of insulin resistance and islet β-cell dysfunction. Type 2 diabetes is a progressive disease, and its dependence on exogenous glycemic control increases over the development of its natural course, leading to multiple tissue and organ diseases and causing various secondary complications. Traditional treatment relies heavily on drugs, yet oral drugs and exogenous insulin can only temporarily maintain blood glucose or temporarily improve insulin sensitivity; however, the disease cannot be cured fundamentally. With the deepening of stem cell research, the self-renewal and directional differentiation potential of stem cells have opened up new ideas for repairing damaged tissues and restoring islet function, thus treating diabetes. This article reviews the method, advantages, disadvantages, and research progress of different types of stem cells in the treatment of type 2 diabetes. We hope to provide reference for the study of the pathogenesis of diabetes and its complications, and for applying stem cell transplantation technology to restore insulin independence, as well as to establish an evaluation of the safety and effectiveness of stem cell therapy.