Endocrine pancreatic tissue in newborn rats was studied 1 to 17 days after the destruction of B cells by an injection of streptozotocin. Regeneration of insulin cells was observed four days after streptozotocin injection, which was followed by recovery from the diabetic state and an increased pancreatic insulin content. Regeneration was characterised by new islets budding from small ducts. The pancreas of newborn rats, like the embryonic pancreas, thus retains a capacity to form endocrine tissue, although some degree of reduplication of preexisting B cells may also be involved in the process. Newborn rats injected with streptozotocin constitute an interesting model for the study of factors which may act on the regenerative potential of pancreatic endocrine tissue in the diabetic state.