An ultrastructural study of endocrine cells was performed in the pancreas of rats treated with a single dose of streptozotocin on the day of birth. Most of the B cells present at birth were destroyed by streptozotocin but some survived and could again synthesize insulin after eliminating their altered fragments in phago-lysosome structures. New B cells were produced primarily by the formation of new islets from the small pancreatic ducts. A study of mitosis in colchicine treated animals showed that most B cells present on day 4 were formed by mitosis of undifferentiated cells. No significant division of preexisting differentiated B cells could be shown in streptozotocin treated rats. B cell regeneration in this newborn rat model is thus explained primarily by budding of new islets from the ducts.