Cell replacement therapy using stem-cell-derived insulin-producing β-like cells (sBCs) has been proposed as a practical cure for patients with type one diabetes (T1D). sBCs can correct diabetes in preclinical animal models, demonstrating the promise of this stem cell-based approach. However, in vivo studies have demonstrated that most sBCs, similarly to cadaveric human islets, are lost upon transplantation due to ischemia and other unknown mechanisms. Hence, there is a critical knowledge gap in the current field concerning the fate of sBCs upon engraftment. Here we review, discuss effects, and propose additional potential mechanisms that could contribute toward β-cell loss in vivo. We summarize and highlight some of the literature on phenotypic loss in β-cells under both steady, stressed, and diseased diabetic conditions. Specifically, we focus on β-cell death, dedifferentiation into progenitors, trans-differentiation into other hormone-expressing cells, and/or interconversion into less functional β-cell subtypes as potential mechanisms. While current cell replacement therapy efforts employing sBCs carry great promise as an abundant cell source, addressing the somewhat neglected aspect of β-cell loss in vivo will further accelerate sBC transplantation as a promising therapeutic modality that could significantly enhance the life quality of T1D patients.