The intensity of research on pancreatic development has increased markedly in the past 5 years, primarily for two reasons: we now know that the insulin-producing β-cells normally arise from an endodermally derived, pancreas-specified precursor cell, and successful transplants of islet cells have been performed, relieving patients with type I diabetes of symptoms for extended periods after transplantation. Combining in vitro β-cell formation from a pancreatic biopsy of a diabetic patient or from other stem-cell sources followed by endocrine cell transplantation may be the most beneficial route for a future diabetes therapy. However, to achieve this, a thorough understanding of the genetic components regulating the development of β-cells is required. The following review discusses our current understanding of the transcription factor networks necessary for pancreatic development and how several genetic interactions coming into play at the earliest stages of endodermal development gradually help to build the pancreatic organ. Developmental Dynamics 229:176–200, 2004. © 2003 Wiley-Liss, Inc.