Diabetes is a growing world health problem with a rising incidence in low and middle-income countries. Since garlic is inexpensive and its extract has been shown to ameliorate hyperglycemia by increasing insulin production in STZ-induced diabetic rats, we utilized this injury model to investigate the origin of the newly formed β-cells, the genes that regulate their development and partial mechanism of islet regeneration triggered by aqueous garlic extract using real-time PCR, western blotting and immunohistochemical methods. Mature insulin-producing cells were detected from 2 different cell sources. This first was through direct differentiation of putative islet progenitor cells where expression levels of endocrine progenitor cell marker Ngn3 and the immature β-cell markers Pdx1, NeuroD1, Pax4, Pax6, MafB, Nkx2-2 and Nkx6-1 were increased after 1 to 4 weeks of treatment. At the end of the 8-week treatment period, the mature β-cell markers insulin-1, insulin-2, UCN3, and Glut2 reached their highest expression including Snap25 that control insulin release. α-cell differentiation markers were also upregulated including MafB and Gcg. Additionally, mature β-cells were observed to arise from α-cells through cell-type switching “transdifferentiation”. This cell type conversion was detected when co-staining for both α-cell marker glucagon and β-cell markers insulin and Glut2. Further, downregulation of Men-1 at the end of the treatment period also reinforced the cell type switch. Our results demonstrate that after inducing diabetes by destroying most β-cells with STZ, garlic extract can trigger β-cell regeneration through the differentiation of endocrine progenitor cells or the transdifferentiation of α-cell with the ability to release insulin in response to increased blood glucose levels.