Diabetes affects 4 to 5% of the population worldwide and is the most common metabolic disorder. The number of individuals diagnosed with diabetes is rapidly increasing, especially in the developed countries and the disorder frequently leads to secondary complications such as retinopathy, nephropathy, neuropathy and cardiovascular disease. Type II (non-insulin-dependent) diabetes mellitus is the most common form of diabetes, more than 90% of diagnosed cases, and results from insulin resistance, pancreatic beta-cell dysfunction, or a combination of both. The beta-cell dysfunction seems to result in part from an inability of the beta cells to produce and secrete sufficient amounts of active insulin in response to an increased demand for insulin. Type I (insulin-dependent) diabetes mellitus is caused by an autoimmune destruction of the insulin producing beta cells, resulting in insulin deficiency. The existing therapies for both types of diabetes are unsatisfactory since they do not offer a cure and are mostly not sufficient for preventing the secondary complications associated with diabetes. Thus, there is a great need for new improved therapies. This search is, however, hampered by our currently limited knowledge of the basic processes that control the proliferation, differentiation, survival and physiology of the beta cell. Over the last 7 to 8 years our knowledge concerning the development of the pancreas has increased substantially due to the use of genetically modified mice. Nevertheless, key questions regarding the control of proliferation and differentiation of pancreatic progenitor cells into fully functional beta cells remain to be solved.