Genetically engineered stem cells that overexpress genes encoding therapeutic products can be exploited to correct metabolic disorders by repairing and regenerating diseased organs or restoring their function. Hair follicles are readily accessible and serve as a rich source of autologous stem cells for cell-based gene therapy. Here we isolated mesenchymal stem cells from human hair follicles (HF-MSCs) and engineered them to overexpress the human insulin gene and release human insulin in a time- and dose-dependent manner in response to rapamycin. The engineered HF-MSCs retained their characteristic cell surface markers and retained their potential to differentiate into adipocytes and osteoblasts. When mice with streptozotocin-induced type 1 diabetes were engrafted with these engineered HF-MSCs, these cells expressed and released a dose of human insulin, dramatically reversed hyperglycemia, and significantly reduced death rate. Moreover, the engineered HF-MSCs did not form detectable tumors throughout the 120-day animal tests in our experiment. Our results show that HF-MSCs can be used to safely and efficiently express therapeutic transgenes and therefore show promise for cell-based gene therapy of human disease.