Multipotent mesenchymal stromal cells (MSC) seems promising for the treatment of numerous diseases. However, mechanisms leading to beneficial effects remain obscure. We explored the potential of human MSCs on the function of human islets and porcine hepatocyte viability. Results show that culturing islets with MSCs promoted insulin secretion solely under cell-to-cell contact condition. The involvement of N-cadherin interaction in this beneficial effect was identified since its specific blocking abolished the MSC-induced insulin secretion. Transplantation of co-encapsulated islets and MSCs into immunocompetent and streptozotocin-induced diabetic-mice significantly prolonged graft survival and function. Further, a high-yield isolation protocol for porcine hepatocytes was established. Co-culturing and co-encapsulation of hepatocytes with MSCs improved hepatocyte survival and function, as demonstrated by the increased metabolic function and albumin secretion of hepatocytes in vitro. Our results suggest that beneficial effects by MSCs are mediated by N-cadherin interactions and that MSC are efficient to improve islet and hepatocyte function.