Neonatal diabetes mellitus can be transient or permanent. The severe form of permanent neonatal diabetes mellitus can be associated with pancreas agenesis. Normal pancreas development is controlled by a cascade of transcription factors, where insulin promoter factor 1 (IPF1) plays a crucial role. Here, we describe two novel mutations in the IPF1 gene leading to pancreas agenesis. Direct sequence analysis of exons 1 and 2 of the IPF1 gene revealed two point mutations within the homeobox in exon 2. Genetic analysis of the parents showed that each mutation was inherited from one parent. Mutations localized in helixes 1 and 2, respectively, of the homeodomain, decreased the protein half-life significantly, leading to intracellular IPF1 levels of 36% and 27% of wild-type levels. Both mutant forms of IPF1 were normally translocated to the nucleus, and their DNA binding activity on different known target promoters was similar to that of the wild-type protein. However, transcriptional activity of both mutant IPF1 proteins, alone or in combination with HNF3β/Foxa2, Pbx1, or the heterodimer E47-β2 was reduced, findings accounted for by decreased IPF1 steady state levels and not by impaired protein-protein interactions. We conclude that the IPF1 level is critical for human pancreas formation.