A method of generating islet cells from pluripotent stem cells is disclosed. The method comprises: (a) culturing the pluripotent stem cells in a differentiation medium so as to differentiate the pluripotent stem cells into endoderm cells; and (b) culturing the endoderm cells in a medium comprising at least one growth factor, a cAMP inducer and retinoic acid (RA), said at least one growth factor being selected from the group consisting of FGF10, bFGF and FGF7 so as to generate further differentiated cells; and (c) culturing the further differentiated cells in a medium comprising a maturation factor selected from the group consisting of nicotinamide, GLP-1 and exendin 4, thereby generating islet cells from pluripotent stem cells. Further methods of generating islet cells are also disclosed, isolated cell populations comprising same and uses thereof.