The host environment is a crucial factor for considering the transplant of stem cell-derived immature pancreatic cells in patients with type 1 diabetes. Here, we investigated the effect of insulin (INS)-deficient diabetes on the fate of immature pancreatic endocrine cell grafts and the underlying mechanisms. Human induced pluripotent stem cell-derived pancreatic endocrine progenitor cells (EPCs), which contained a high proportion of chromogranin A+ NK6 homeobox 1+ cells and very few INS+ cells, were used. When the EPCs were implanted under the kidney capsule in immunodeficient mice, INS-deficient diabetes accelerated increase in plasma human C-peptide, a marker of graft-derived INS secretion. The acceleration was suppressed by INS infusion but not affected by partial attenuation of hyperglycemia by dapagliflozin, an INS-independent glucose-lowering agent. Immunohistochemical analyses indicated that the grafts from diabetic mice contained more endocrine cells including proliferative INS-producing cells compared with that from nondiabetic mice, despite no difference in whole graft mass between the two groups. These data suggest that INS-deficient diabetes upregulates the INS-secreting capacity of EPC grafts by increasing the number of endocrine cells including INS-producing cells without changing the graft mass. These findings provide useful insights into postoperative diabetic care for cell therapy using stem cell-derived pancreatic cells.