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Recent findings suggest that bone marrow (BM) cells have the capacity to differentiate into a variety of cell types including endocrine cells of the pancreas. We report that BM derived cells, when cultured under defined conditions, were induced to trans-differentiate into insulin-producing cells. Furthermore, these insulin-producing cells formed aggregates that, upon transplantation into mice, acquired architecture similar to islets of Langerhans. These aggregates showed endocrine gene expression for insulin (I and II), glucagon, somatostatin and pancreatic polypeptide. Immunohistochemistry also confirmed that these aggregates were positive for insulin, somatostatin, pancreatic polypeptide and C-peptide. Also, Western and ELISA analysis demonstrated expression of proinsulin and/or secretion of active insulin upon glucose challenge. Subcapsular renal transplantation of these aggregates into hyperglycemic mice lowered circulating blood glucose levels and maintained comparatively normal glucose levels for up to 90 days post-transplantation. Graft removal resulted in rapid relapse and death in experimental animals. In addition, electron microscopy revealed these aggregates had acquired ultrastructure typically associated with mature beta (beta) cells. These results demonstrate that adult BM cells are capable of trans-differentiating into a pancreatic lineage in vitro and may represent a pool of cells for the treatment of diabetes mellitus.