When pancreases from fetal rats were transplanted beneath the kidney capsule of isologous normal adult recipients, continued growth and differentiation of the endocrine portion of the pancreas occurred. While limited amounts of acinar tissues were identifiable in the early transplant period (7 days), such cells were absent in long term transplants (14 and 21 days). In contrast, while few definitive islet beta cells were present at the time of transplantation, following 21 days at the kidney site large circumscribed islets comprised of heavily granulated beta cells in association with duct epithelial cells predominated. Mitotic figures were seen in both these cell populations. Total islet mass had increased over 20-fold during the transplantation period. Similar results were observed if fetal pancreases were grown in organ culture for ten days prior to transplantation. Continued islet and duct cell growth, as evidenced by mitotic figures and an increase in absolute islet cell mass was obtained in such cultured explants when transplanted to either isogenic or allogenic recipients. These observations support the hypothesis that fetal pancreas may be the best source of donor material for transplantation to diabetic recipients, in part due to the continued growth and differentiation of the islet tissue during the transplantation period.