Conophylline is a vinca alkaloid extracted from the tropical plant Ervatamia microphylla and has been shown to induce differentiation of pancreatic AR42J cells. In the present study, we investigated the effect of conophylline on the differentiation of pancreatic precursor cells. In the rat pancreatic rudiment in organ culture, conophylline inhibited the formation of cystic structure and increased the number of insulin-positive cells. Conophylline also markedly increased the expression of mRNA for insulin and the number of pancreatic duodenal homeobox-1-positive cells. These effects of conophylline were similar to those of activin A. We also examined the effect of conophylline on neonatal rats treated with streptozotocin, a model of type 2 diabetes. Treatment with conophylline significantly reduced the plasma glucose concentration and improved glucose tolerance in response to glucose loading. The insulin content and the beta-cell mass at 2 months were significantly increased by conophylline. The number of islet-like cell clusters and pancreatic duodenal homeobox-1-positive ductal cells was greater in conophylline-treated rats. These results suggest that conophylline induces differentiation of pancreatic precursor cells and increases the formation of beta-cells.