Human stem cell-derived pancreatic endoderm (PE) represents a potential source for beta cell replacement therapy in type 1 diabetes. Device-encapsulated human PE derived from embryonic stem cells (hES-PE) or from induced pluripotent stem cells (hiPS-PE) has been shown to generate insulin-producing implants in mice. These advances have led to the start of a clinical trial with device-encapsulated hES-PE to assess their safety and examine formation of beta cells in patients. Meanwhile, the therapeutic potential of encapsulated hES-PE and hiPS-PE should be assessed, in particular their ability to form and maintain a metabolically adequate functional beta cell mass (FBM). Processes that influence FBM formation in devices should also be investigated to identify targets and methods for improvement. These objectives have been addressed by the present thesis. This implied developing and implementing a combination of in vivo, in situ and ex vivo markers of beta cell number and functional maturation. In this work, we assessed these key components of the FBM in device-encapsulated human pancreatic endoderm implants and determined characteristics required for achievement of metabolic effects. We identified modifications on the graft and implant site that positively influence graft outcome, and unveiled phenomena underlying beta cell formation as potential targets for additional improvement. Findings lay the ground for further preclinical and clinical development of stem cell-derived beta cell therapy for type 1 diabetes.