Activins regulate the growth and differentiation of a variety of cells. During pancreatic islet development, activins are required for the specialization of pancreatic precursors from the gut endoderm during midgestation. In this study, we probed the role of activin signaling during pancreatic islet cell development and regeneration. Indeed, we found that both activins and activin receptors are upregulated in duct epithelial cells during islet differentiation. Interestingly, the expression of endogenous cellular inhibitors of activin signaling, follistatin and Cripto, were also found to be augmented. Inhibition of activins significantly enhanced survival and expansion of pancreatic epithelial cells but decreased the numbers of differentiated β-cells. Our results suggest that the homeostasis of growth and terminal differentiation requires a precise context-dependent regulation of activin signaling. Follistatin participates in this process by promoting expansion of precursor cells during pancreas growth.