Cellophane wrapping of the hamster pancreas induces a trophic stimulus that leads to ductular proliferation in association with nesidioblastosis. Our previous studies have demonstrated that cellophane wrapping of the pancreas leads to the development of a new population of beta-cells that is capable of reversing streptozocin-induced diabetes. The predominant type of islet regenerated is initially small but progressively enlarges to the size of control islets. Electron microscopy and immunocytochemistry revealed areas of nesidioblastosis that contained a predominance of beta-cells, but also alpha- and delta-cells. Metabolic studies were conducted to define the functional aspects of this model. After cellophane wrapping of the normal hamster pancreas, normal serum levels of glucose and insulin were maintained despite a 2.5-fold increase in the number of pancreatic islets per square millimeter compared with a control group that underwent a sham operation and was not wrapped. Islets were harvested from control and cellophane-wrapped pancreata and demonstrated a similar biphasic insulin response to high-dose glucose perfusion in vitro. Insulin secretion ceased with low-dose glucose perfusion. Insulin derived from unwrapped pancreata was found to comprise two peaks on high-pressure liquid chromatography and that from wrapped pancreata a single peak. The biologically active insulin corresponded on high-pressure liquid chromatography with the standard insulin preparation. Thus, the experimental induction of nesidioblastosis is associated with development of normal beta-cell sensitivity to glucose and release of a single form of a biologically active insulin. It thus represents a possible therapeutic approach to diabetes.