Activin A is expressed in endocrine precursor cells of the fetal pancreatic anlage. To determine the physiological significance of activins in the pancreas, a transgenic mouse line expressing the truncated type II activin receptor under the control of beta-actin promoter was developed. Histological analyses of the pancreas revealed that the pancreatic islets of the transgenic mouse were small in size and were located mainly along the pancreatic ducts. Immunoreactive insulin was detected in islets, some acinar cells, and in some epithelial cells in the duct. In addition, there were abnormal endocrine cells outside the islets. The shape and the size of the endocrine cells varied and some of them were larger than islets. These cells expressed immunoreactive insulin and glucagon. In the exocrine portion, there were morphologically abnormal exocrine cells, which did not form a typical acinar structure. The cells lacked spatial polarity characteristics of acinar cells but expressed immunoreactive amylase, which was distributed diffusely in the cytoplasm. Plasma glucose concentration was normal in the transgenic mouse before and after the administration of glucose. The insulin content of the pancreas in transgenic and normal mice was nearly identical. These results suggest that activins or related ligands regulate the differentiation of the pancreatic endocrine and exocrine cells.