The present invention provides a novel therapeutic characteristic method describing Swertisins potential in islet differentiation /islet neogenesis along with cellular homing. More specifically the present invention relates to step wise differentiation of human and mouse bone marrow derived mesenchymal stem cells into functional, efficient, and cost-effective islet like clusters using specific differentiation media. The invention also describes an in vivo functionality of isletlike cell clusters in ameliorating the diabetic condition streptozotocin diabetic mouse model. Further, Swertisin enhances homing of mouse bone marrow derived mesenchymal stem cells towards the damaged pancreas and stimulate to differentiate into functional insulin producing cells. Thus, present invention relates to methods of treating diabetes.