Beta cell mass regulation represents a critical issue for understanding and treatment of diabetes. The most important process in the development of diabetes is beta cell death, generally induced by glucotoxicity or glucolipotoxicity, and the regeneration mechanism of new beta cells that will replace dead beta cells is still not fully understood. The aim of this study was to investigate the generation mechanism of new beta cells by considering the compensation phase of type 2 diabetes mellitus. In this study, pancreatic islet derived mesenchymal stem cells (PI-MSCs) were isolated from adult rats and characterized. Then, beta cells isolated from rats were co-cultured with PI-MSCs and they were exposed to glucotoxicity, lipotoxicity and glucolipotoxicity conditions for 72hr. As the results apoptotic and necrotic cell death were increased in both PI-MSCs and beta cells especially by the exposure of glucotoxic and glucolipotoxic conditions to the co-culture systems. Glucotoxicity induced-differentiated beta cells were functional due to their capability of insulin secretion in response to rising glucose concentrations. Moreover, beta cell proliferation was induced in the glucotoxicity-treated co-culture system whereas suppressed in lipotoxicity or glucolipotoxicity-treated co-culture systems. In addition, 11 novel proteins, that may release from dead beta cells and have the ability to stimulate PI-MSCs in the direction of differentiation, were determined in media of glucotoxicity or glucolipotoxicity-treated co-culture systems. In conclusion, these molecules were considered as important for understanding cellular mechanism of beta cell differentiation and diabetes. Thus, they may be potential targets for diagnosis and cellular or therapeutic treatment of diabetes.