The progenitor cells responsible for transforming growth factor (TGF)-alpha-induced pancreatic ductal metaplasia and neoplasia remain uncharacterized. During pancreatic development, differentiated cell types arise from ductal progenitor cells expressing the Pdx1 homeodomain transcription factor. The aims of this study were, first, to evaluate the role of Pdx1-expressing stem cells in MT-TGFalpha transgenic mice, and second, to further characterize cell proliferation and differentiation in this model.To assess Pdx1 gene expression in normal and metaplastic epithelium, we performed in vivo reporter gene analysis using heterozygous Pdx1(lacZ/+) and bigenic Pdx1(lacZ/+)/MT-TGFalpha mice.Pdx1(lacZ/+)/MT-TGFalpha bigenics showed up-regulated Pdx1 expression in premalignant metaplastic ductal epithelium. In addition to Pdx1 gene activation, TGF-alpha-induced metaplastic epithelium demonstrated a pluripotent differentiation capacity, as evidenced by focal expression of Pax6 and initiation of islet cell neogenesis. The majority of Pdx1-positive epithelial cells showed no expression of insulin, similar to the pattern observed during embryonic development.Overexpression of TGF-alpha induces expansion of a Pdx1-expressing epithelium characterized by focal expression of Pax6 and initiation of islet neogenesis. These findings suggest that premalignant events induced by TGF-alpha in mouse pancreas may recapitulate a developmental program active during embryogenesis.