The functional unit of the endocrine pancreas is the islet of Langerhans. Islets are nested within the exocrine tissue of the pancreas and are composed of α-, β-, δ- and γ-cells¹. β-Cells produce insulin and form the core of the islet, whereas α-, δ- and γ-cells are arranged at the periphery of the islet and secrete glucagon, somatostatin and a pancreatic polypeptide, respectively. Little is known about the molecular and genetic factors regulating the lineage of the different endocrine cells. Pancreas development is known to be abolished in Pdx1-mutant mice² and Pax4 mutants lack insulin-producing (β-cells³. Here we show that the paired-box gene Pax6 is expressed during the early stages of pancreatic development and in mature endocrine cells. The pancreas of Pax6 homozygous mutant mice lack glucagon-producing cells, suggesting that Pax6 is essential for the differentiation of α-cells. As mice lacking Pax4 and Pax6 fail to develop any mature endocrine cells, we conclude that both Pax genes are required for endocrine fate in the pancreas.