This review focuses on Type 1 diabetes mellitus (T1DM) and the role of bioengineering, nanotechnology and cell therapy in its treatment. T1DM is discussed in terms of its prevalence as well as the role of the extra cellular matrix (ECM) of the pancreas in its development and mode of action. Surface engineering strategies and the chemistries behind important cell encapsulation techniques, which are emerging from recent research in immunosuppression, are described. Key enabling technologies such as therapeutic agent immobilization on cells, oxygen releasing systems, gene delivery and bio imaging are assessed with respect to T1DM. These latest cell surface technologies provide unlimited possibilities for control of cell/cell and cell/ECM interactions, allowing the ability to confer “immune camouflage”. Finally, we provide an outlook to the future of cell-based technologies for T1DM treatment and their likely deployment in clinical trials.