A 20-fold increase in beta-cell mass has been found after transplantation of porcine neonatal pancreatic cell clusters (NPCCs). Here the mechanisms leading to this increased beta-cell mass were studied. NPCCs (4000 islet equivalents) generated after 8 days culture of digested neonatal pig pancreas were transplanted beneath the renal capsule of streptozotocin (STZ) diabetic and normoglycemic nude mice. Grafts were removed at 10 days, 6 weeks, and 20 weeks after transplantation for immunostaining and insulin content. Proliferation of beta-cells and duct cells was assessed morphometrically using double immunostaining for Ki-67 with insulin or cytokeratin 7 (CK7). Graft maturation was assessed with double immunostaining of CK7 and insulin. Apoptosis was determined using propidium iodide staining. beta-cell proliferation in NPCCs was higher after 8 days of culture compared with that found in neonatal pig pancreas. After transplantation, beta-cell proliferation remained high at 10 days, decreased somewhat at 6 weeks, and was much lower 20 weeks after transplantation. Diabetic recipients not cured at 6 weeks after transplantation had significantly higher beta-cell proliferation compared with those cured and to normoglycemic recipients. The size of individual beta-cells, as determined by cross-sectional area, increased as the grafts matured. Graft insulin content was 20-fold increased at 20 weeks after transplantation compared with 8 days cultured NPCCS: The proliferation index of duct cells was significantly higher in neonatal pig pancreas than in 8 days cultured NPCCs and in 10-day-old grafts. The incidence of apoptosis in duct cells appeared to be low. About 20% of duct cells 10 days post transplantation showed costaining for CK7 and insulin, a marker of protodifferentiation. In conclusion, the increase in beta-cell mass after transplantation of NPCCs is due to both proliferation of differentiated beta-cells and differentiation of duct cells into beta-cells.