The past few years have seen an increase in interest about the molecular and genetic events regulating pancreas development. Transcription factors such as Pdx1, p48 and Nkx2.2 have been shown to be essential for the proper differentiation of exocrine and endocrine tissue; however, pancreas development also involves intricate interactions between the pancreatic epithelium and its surrounding mesenchyme. Signalling factors emanating from the notochord have been shown to repress Sonic hedgehog expression in the endoderm whereas signals originating from the pancreatic mesenchyme determine the proportion of exocrine to endocrine tissue. Understanding the molecular and genetic events underlying pancreas development also opens the door for devising new therapeutic strategies against pancreatic diseases such as diabetes and cancer.