Inducing autologous liver cells to differentiate into endocrine beta cell has been a potential strategy for the treatment of type 1diabetes. However it is still not known which sub-population cells in the liver was responsible for this developmental shift. Pancreatic and duodenal homeobox gene 1 (pdx-1), a crucial transcription factor in pancreatic islet development and differentiation, has attracted much interests in beta cell differentiation experiments. This study was conducted to evaluate whether pdx-1 gene delivered by adeno-associated virus (AAV) could induce autologous liver cells to differentiate into insulin-producing cells and to explore the origin of these cells. Here we used 4 x 10e(11) AAV to deliver pdx-1 to STZ-induced diabetic rats via the portal vein. Immunofluorescent staining showed more insulin-positive cells, which had similar morphology with hepatic oval stem cells and were positive for hepatic oval stem cell markers, Thy-1 and cytokeratin 19 (ck19). In addition to the expression of pdx-1, insulin1 and insulin2, RT-PCR and quantitative real-time PCR also detected significantly higher levels of other important transcription factors in AAV-pdx-1 treated diabetic rat livers. AAV-pdx-1 treated diabetic rats showed partially ameliorated hyperglycemia, better gain of body weight and improved lipid levels. Our data indicated that rat hepatic oval stem cells were differentiated into bioactive insulin-producing cells by AAV-pdx-1 delivery in diabetic rats, with promoted expression of some transcription factors necessary for beta cell development and function.