We have found cytochrome P-450(17alpha) in the islets of Langerhans of rat pancreas. Its existence coincided with that of insulin and demarcated those of glucagon and somatostatin, demonstrating the localization in beta-cells. The enzyme has not only 17alpha-hydroxylase activity but also lyase one, which is a prerequisite for androgen biosynthesis. The pancreatic microsomes converted progesterone mainly to androstenedione with a minor production of 17alpha-hydroxyprogesterone. Due to a low activity of the built-in lyase, cytochrome P-450(17alpha) requires a sufficient electron-transfer from P-450 reductase or presence of an activator to promote the C-C bond cleavage. In beta-cells, P-450 reductase was abundant and could efficiently transfer electrons to P-450(17alpha). Actually, inhibition with anti-P-450 reductase or limitation of NADPH preferentially reduced the lyase activity. Androstenedione was accumulated when its further metabolism was suppressed. We also found localization of cytochrome P-450scc and 3beta-hydroxysteroid dehydrogenase in beta-cells. These results indicate that the immediate substrate for androgen formation, progesterone, is intracellularly produced and is converted mainly to androstenedione with support by an efficient electron supply from P-450 reductase. The product was supposed to be further metabolized to the reduced derivatives such as testosterone, 5alpha-androstanedione, and dihydrotestosterone, which would act as local steroids in the islets of Langerhans.