The development of endocrine cell types within the pancreas is thought to involve the progressive restriction of pluripotential stem cells, which gives rise to the four major cell types: insulin-, glucagon-, somatostatin-, and pancreatic polypeptide-expressing cells. The mechanism by which these peptide hormone genes are induced and then either maintained or repressed during development is unknown, but their coexpression in early precursor cells suggests the involvement of common regulatory factors. Here we show that the somatostatin transcription factor STF-1 is also a principal regulator of insulin expression in beta-cells of the pancreas. STF-1 stimulates the insulin gene by recognizing two well defined islet-specifying elements on the insulin promoter and by subsequently synergizing in trans with the juxtaposed helix-loop-helix protein E47. Within the STF-1 protein, an N-terminal trans-activation domain functions cooperatively with E47 to stimulate insulin transcription. As truncated STF-1 polypeptides lacking the N-terminal activation domain strongly inhibit insulin promoter activity in beta-islet cells, our results suggest that the specification of islet cell types during development may be in part determined by the expression of STF-1 relative to other islet cell factors.