Stem or progenitor cells are a promising potential alternative source of pancreatic islets for transplantation in the treatment of juvenile-onset diabetes. However, to derive islets from such cells, it is important to elucidate the mechanisms of normal pancreatic development. Previous work in our laboratory has shown that, contrary to previous thinking, pancreatic mesenchyme when combined with pancreatic epithelium can contribute cells to islets. However, the signals and role of individual tissues involved in this mesenchyme-to-epithelial transition (MET) have yet to be elucidated. The aim of this study was to investigate whether MET can occur in the absence of pancreatic epithelium. Chick and quail eggs were incubated for 4 days and the dorsal pancreatic buds and stomach rudiments were microdissected. Mesenchyme and epithelium of the organ rudiments were separated after collagenase treatment. Separated pancreatic mesenchyme were cultured alone and in combination with stomach (nonpancreatic). After 7 days of culture, the specimens were analysed using immunohistochemistry for quail-specific nucleolar antigen (QCPN), insulin, and islet precursor cell marker (ISL-1). Pancreatic mesenchyme when cultured in the absence of epithelium did not differentiate into islets, but differentiated into fibroblast-like cells. When pancreatic mesenchyme were cultured in combination with stomach epithelium, there was no evidence of mesenchymally derived islets. We have demonstrated that pancreatic mesenchyme require pancreatic epithelium to differentiate into islet cells. These findings further increase our understanding of normal pancreatic islet development and may help to elucidate the molecular mechanisms of MET in islet development.