Glucagon-like peptide-1 (GLP-1) is an intestinal incretin hormone, derived from the processing of proglucagon, that exerts insulinotropic actions on insulin-producing pancreatic islet beta-cells. Recently GLP-1 was shown to stimulate the growth and differentiation (neogenesis) of beta-cells and appears to do so by inducing the expression of the homeodomain protein IDX-1 (islet duodenum homeobox-1; also known as PDX-1, pancreatic and duodenal homeobox gene; and as IPF-1, insulin promoter factor), which is required for pancreas development and the expression of beta-cell-specific genes. Earlier we identified multipotential progenitor cells in the islet and ducts of the pancreas, termed nestin-positive islet-derived progenitor cells (NIPs). Here we report the expression of functional GLP-1 receptors on NIPs and that GLP-1 stimulates the differentiation of NIPs into insulin-producing cells. Furthermore, confluent NIP cultures express the proglucagon gene and secrete GLP-1. These findings suggest a model of islet development in which pancreatic progenitor cells express both GLP-1 receptors and proglucagon with the formation of GLP-1. Locally produced GLP-1 may act as an autocrine/paracrine developmental morphogen on receptors on NIPs, resulting in the activation of IDX-1 and the expression of the proinsulin gene conferring a beta-cell phenotype. GLP-1 may be an important morphogen both for the embryonic development of the pancreas and for the neogenesis of beta-cells in the islets of the adult pancreas.