Currently there is debate regarding the capacity of pancreatic islets to regenerate in adult animals. Because pancreatic endocrine cells are thought to arise from duct cells, we examined the pancreatic ductal epithelium of the diabetic NOD mouse for evidence of islet neogenesis. We have evidence of duct proliferation as well as ductal cell differentiation, as suggested by bromodeoxyuridine-labeling and the presence of glucagon-containing cells within these ducts. In addition, the ductal epithelia in diabetic NOD mice expressed the neuroendocrine markers neuropeptide Y and tyrosine hydroxylase. These ducts also expressed the homeobox gene product, insulin promoter factor 1. Ductal cell proliferation and expression of these markers was not observed in transgenic NOD mice (NOD-E), which do not develop clinical or histopathological symptoms of IDDM. This suggests that the observed ductal cell proliferation and differentiation was a direct result of β-cell destruction and insulin insufficiency in these adult diabetic mice, which further suggests that these events are recapitulating islet ontogeny observed during embryogenesis. It is possible that comparable processes occur in the human diabetic pancreas.