Previously we demonstrated the superiority of small islets vs large islets in terms of function and survival after transplantation, and we generated reaggregated rat islets (pseudo‐islets) of standardized small dimensions by the hanging‐drop culture method (HDCM). The aim of this study was to generate human pseudo‐islets by HDCM and to evaluate and compare the physiological properties of rat and human pseudo‐islets. Isolated rat and human islets were dissociated into single cells and incubated for 6–14 days by HDCM. Newly formed pseudo‐islets were analysed for dimensions, morphology, glucose‐stimulated insulin secretion (GSIS) and total insulin content. The morphology of reaggregated human islets was similar to that of native islets, while rat pseudo‐islets had a reduced content of α and δ cells. GSIS of small rat and human pseudo‐islets (250 cells) was increased up to 4.0‐fold (p < 0.01) and 2.5‐fold (p < 0.001), respectively, when compared to their native counterparts. Human pseudo‐islets showed a more pronounced first‐phase insulin secretion as compared to intact islets. GSIS was inversely correlated to islet size, and small islets (250 cells) contained up to six‐fold more insulin/cell than large islets (1500 cells). Tissue loss with this new technology could be reduced to 49.2 ± 1.5% in rat islets, as compared to the starting amount. With HDCM, pseudo‐islets of standardized size with similar cellular composition and improved biological function can be generated, which compensates for tissue loss during production. Transplantation of small pseudo‐islets may represent an attractive strategy to improve graft survival and function, due to better oxygen and nutrient supply during the phase of revascularization. Copyright © 2014 John Wiley & Sons, Ltd.