Induced pluripotent stem cells (iPSCs) are a new potential cure for diabetes, characterised by a capacity for self-renewal and differentiation to pancreatic islet beta cells, which secrete insulin and rebuild blood glucose balance. The safety and validity of iPSC-derived cell therapy for diabetes remain controversial. Teratoma formation arising from undifferentiated stem cells is a serious risk, but clinical reports of this phenomenon are rare. Here, we report a distinctive case of immature teratoma after the patient underwent iPSC-derived cell therapy for diabetes in another hospital, and he wastreated in our soft tissue sarcoma centre. The patient received islet beta cell injection, in which the cells were differentiated from autologous iPSCs, into the deltoid muscle. Two months later, a mass located in the injection area was detected and presented with enlarged axillary lymph nodes. Here, we present the clinical, radiological, and pathological features of this immature teratoma. Distinct from typical immature teratomas, this tumour was characterised by rapid growth and local lymph node metastasis. The tumour did not respond to typical chemotherapy regimens for immature teratomas. Magnetic resonance imaging (MRI) showed heterogeneous enhancement and a rich blood supply to the tumour. Histopathology revealed immature endoderm, mesoderm, and ectoderm tissues composed of osseous, cartilaginous, vascular, and adenoid tissues, which have more cellular atypia than typical teratomas. Staining for both OCT4 and SOX2 was positive in the tumour cell nucleus as revealed by immunofluorescence assay; however, insulin staining was negative. Next-generation sequencing showed many missense mutations, but abnormal gene rearrangement, defects, or changes in copy numbers were not observed. In conclusion, more attention should be given to teratoma formation after iPSC-derived cell therapy for diabetes, because these tumours are more aggressive than typical teratomas. The safety and validity of iPSC-derived cell therapy for diabetes should be explored further in standardised clinical trials.