Summary Cell replacement therapy is a hopeful strategy for diabetes treatment, whereas lack of pancreas donors leads this strategy to a dilemma. Here, we demonstrate that Trop2 is a useful marker to enrich the progenitors with a long-term organoid formation capability from extrahepatic bile ducts in both mouse and human. Based on BMP7 initiation, the Trop2-positive mouse extrahepatic bile duct organoids (mBDOs) could be induced to produce 8.49 ± 0.45% of insulin-secreting cells. We further screened out a chemical small molecule TLY142, which significantly increased the proportion of insulin-secreting cells to 19.9 ± 0.62% and 25.50 ± 4.82% in induced mouse and human extrahepatic bile duct organoids (hBDOs) in vitro , and transplantation of these differentiated organoids into STZ-induced diabetic nude mice remarkably improved their blood glucose and enhanced glucose sensitivity. This study provides a novel strategy that using small molecules promotes biliary duct organoids differentiation into β cells to cure diabetes. Graphic abstract