Organ-specific stem cells are the natural progenitors in tissue regeneration and possess plasticity to differentiate into specialized cells in adult tissues. Small hepatocytes (SHCs) identified in the adult liver are one such cell type. Here we show that SHCs, which are capable of self-renewal and differentiation into hepatocytes, can be induced to generate insulin-producing cells under appropriate Culture conditions. These differentiated cells express pancreatic beta cell differentiation-related transcripts and hepatocyte differentiation-related transcripts, as shown by reverse-transcription PCR/nested PCR. In addition, enforced expression of the homeodomain transcription factor Pdx1 in these cells contributes to enhancement Of insulin release in response to insulin secretagogues. These results indicate that the SHCs described here have the ability to differentiate into insulin-producing cells, and further support the idea that engineering to generate insulin-secreting cells could provide a useful resource for future therapies for diabetes mellitus. (C) 2004 Elsevier Inc. All rights reserved.