Regenerative medicine and stem cell therapy may represent the solution for the treatment of non-curable human diseases such as type 1 diabetes. In this context of growing demand for functional and safe stem cells, human amniotic epithelial cells (hAECs) from term placenta have attracted increasing interest for their wide availability, stem cell properties, and differentiation plasticity, which make them a promising tool for stem cell-based therapeutic applications. We initially assayed the stemness characteristics of hAECs in serum-free conditions. Subsequently we developed a culture procedure on extracellular matrix for the formation of three-dimensional (3D) spheroids. Finally, we tested the immunomodulation and differentiation potential of hAEC spheroids: the presence of pancreatic endocrine hormones was revealed with transmission electron microscopy and immunofluorescence analyses; the release of C-peptide in hyperglycemic conditions was assayed with ELISA. The serum-free culture conditions we applied proved to maintain the basic stemness characteristics of hAECs. We also demonstrated that 3D spheroids formed by hAECs in extracellular matrix can be induced to differentiate into insulin-producing cells. Finally, we proved that control and induced cells equally inhibit the proliferation of activated mononuclear cells. The results of this study highlight the properties of amnion derived epithelial cells as promising and abundant source for cell-based therapies. In particular we are the first group to show the in vitro pancreatic induction of hAECs cultured on extracellular matrix in a 3D fashion. We accordingly propose the outcomes of this study as a novel contribution to the development of future cell replacement therapies involving placenta-derived cells.