Mesenchymal Stem Cells (MSCs) possess important characteristics that could be exploited in therapeutic strategies for Type 1 Diabetes (T1D) and for certain complications of Type 2 Diabetes (T2D). MSCs can inhibit autoimmune, alloimmune and inflammatory processes. Moreover, they can promote the function of endogenous and transplanted pancreatic islets. Furthermore, they can stimulate angiogenesis. MSC functions are largely mediated by their secretome, which includes growth factors, exosomes, and other extracellular vesicles. MSCs have shown a good safety profile in clinical trials. MSC-derived exosomes are emerging as an alternative to the transplantation of live MSCs. MSCs harvested from different anatomical locations (e.g. bone marrow, umbilical cord, placenta, adipose tissue, and pancreas) have shown differences in gene expression profiles and function. Data from clinical trials suggest that umbilical cord-derived MSCs could be superior to bone marrow-derived MSCs for the treatment of T1D. Autologous MSCs from diabetic patients may present abnormal functions. BM-MSCs from T1D patients exhibit gene expression differences that may impact in vivo function. BM-MSCs from T2D patients seem to be significantly impaired due to the T2D diabetic milieu. In this review, we highlight how the harvesting site and donor derivation can affect the efficacy of MSC-based treatments for T1D and T2D.