Type 1 diabetes (T1D) is a serious autoimmune disease characterized by progressive destruction of pancreatic beta cells, leading to lifelong dependence on exogenous insulin. Available therapies focus primarily on insulin replacement, either directly or through transplantation/regeneration of insulin-secreting cells. Despite tremendous advances in recent decades, the major limitations in insulin replacement therapy have not been overcome yet. The ideal therapeutic approach for T1D should produce physiological and long-lasting glucose homeostasis without the need for invasive surgery, immunosuppression or long-term administration of any exogenous agent. A promising approach that meets these requirements is subcutaneous transplantation of embryonic brown adipose tissue (BAT). In mouse models of insulin-dependent diabetes, BAT transplants produce long-term euglycemia independent of insulin and without immunosuppression. Reversal of diabetes is accompanied by decrease of inflammation, recovery of healthy adipose tissue, suppression of glucagon and secretion of beneficial adipokines, with no detectable increase in endogenous insulin production. It appears that a combination of alternate hormones arising from adipose tissue establishes a new physiological equilibrium compensating for the lack of insulin. Existing data point to a critical role for insulin-like growth factor 1 (IGF-1), both in the early survival of transplants and their continued function. Adult BAT transplants alone cannot correct T1D. However, temporary administration of exogenous IGF-1 enables adult BAT transplants to correct T1D in mice, confirming the importance of this hormone and providing a plausible path for clinical translation of this approach. While the underlying mechanisms are not fully documented, the consistent efficacy and lack of undesirable side effects of BAT transplantation attest to its therapeutic potential.