The mammalian pancreas contains two distinct cell populations: endocrine cells which secrete hormones into the bloodstream, and exocrine cells, which secrete enzymes into the digestive tract¹. The four endocrine cell types found in the adult pancreas—α, β, δ and PP—synthesize glucagon, insulin, somatostatin and pancreatic polypeptide, respectively². All of these endocrine cells arise from common multipotent precursors, which coexpress several hormones when they start to differentiate³. Expression of some homeobox genes in the early developing pancreas has been reported^4–7. The Pax4 gene is expressed in the early pancreas, but is later restricted to βcells. Inactivation of Pax4 by homologous recombination results in the absence of mature insulin-and somatostatin-producing cells (β and δ, respectively) in the pancreas of Pax4 homozygous mutant mice, but glucagon-producing α cells are present in considerably higher numbers. We propose that the early expression of Pax4 in a subset of endocrine progenitors is essential for the differentiation of the β and δ cell lineages. A default pathway would explain the elevated number of α cells in the absence of Pax4.