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Neonatal porcine pancreas has considerable capacity for growth and differentiation, making it an attractive potential source of islet tissue for xenotransplantation. Pancreases from 1–3-day-old newborn pigs were digested with collagenase and cultured for 8 days. The resulting cellular aggregates are called porcine neonatal pancreatic cell clusters (NPCCs). The mean yield of NPCCs from a newborn pig was 28,200 ± 1700 islet equivalents. Cytokeratin 7 (CK7) was used as a marker for the immunostaining of pancreatic duct cells. In neonatal pancreas, 18% of the insulin-positive cells co-stained for CK7, thus being protodifferentiated. NPCCs also contained protodifferentiated cells; insulin/PP and insulin/somatostatin co-stained cells were more common than insulin/glucagon cells. Between 1 and 8 days of culture, the DNA content of the NPCCs fell to 16% and the insulin content to 33% of the starting value, mainly due to the preferential loss of exocrine cells. Transplantation of 2000 or 4000 NPCCs into diabetic nude mice typically normalized glucose values in 10–20 weeks. Mice with successful grafts had lower fasting blood glucose levels than normal mice and accelerated glucose clearance after an IP glucose load. The starting NPCCs consisted of 17% insulin-staining cells, but the grafts of mice with reversed diabetes consisted of 94% beta cells, with some co-stained for CK7, indicating that the grafts still contained immature cells. The mass of insulin-producing cells rose from 0.22 ± 0.08 mg 1 week after transplantation to 4.34 ± 0.27 mg in mice sacrificed at 27–35 weeks. In summary, NPCCs contain mostly islet precursor cells, which when transplanted into nude mice undergo striking differentiation and beta cell expansion.