Type 1 Diabetes (T1D) is a complex autoimmune disorder which occurs as a result of an intricate series of pathologic interactions between pancreatic β-cells and a wide range of components of both the innate and the adaptive immune systems. Stem-cell therapy, a recently-emerged potentially therapeutic option for curative treatment of diabetes, is demonstrated to cause significant alternations to both different immune cells such as macrophages, natural killer (NK) cells, dendritic cells, T cells, and B cells and non-cellular elements including serum cytokines and different components of the complement system. Although there exists overwhelming evidence indicating that the documented therapeutic effects of stem cells on patients with T1D is primarily due to their potential for immune regulation rather than pancreatic tissue regeneration, to date, the precise underlying mechanisms remain obscure. On the other hand, immune-mediated rejection of stem cells remains one of the main obstacles to regenerative medicine. Moreover, the consequences of efferocytosis of stem-cells by the recipients’ lung-resident macrophages have recently emerged as a responsible mechanism for some immune-mediated therapeutic effects of stem-cells. This review focuses on the nature of the interactions amongst different compartments of the immune systems which are involved in the pathogenesis of T1D and provides explanation as to how stem cell-based interventions can influence immune system and maintain the physiologic equilibrium.