AbstractNodal and its antagonist, Lefty, are important mediators specifying the laterality of the organs during embryogenesis. Nodal signals through activin receptors in the presence of its co‐receptor, Cripto. In the present study, we investigated the possible roles of Nodal and Lefty signaling during islet development and regeneration. We found that both Nodal and Lefty are expressed in the pancreas during embryogenesis and islet regeneration. In vitro studies demonstrated that Nodal inhibits, whereas Lefty enhances, the proliferation of a pancreatic cell line. In addition, we showed that Lefty‐1 activates MAPK and Akt phosphorylation in these cells. In vivo blockade of endogenous Lefty using neutralizing Lefty‐1 monoclonal antibody results in a significantly decreased proliferation of duct epithelial cells during islet regeneration. This is the first study to decipher the expression and function of Nodal and Lefty in pancreatic growth. Importantly, our results highlight a novel function of Nodal‐Lefty signaling in the regulation of expansion of pancreatic cells. Developmental Dynamics 237:1255‐1267, 2008. © 2008 Wiley‐Liss, Inc.