Pancreatic islet function and glucose homeostasis have been characterized in the transgenic YC-3.0 mouse, which expresses the yellow chameleon 3.0 (YC-3.0) protein under the control of the beta-actin and the cytomegalovirus promoters. Fluorescence from the enhanced yellow fluorescent protein (EYFP), one part of the yellow chameleon protein, was used as a reporter of transgene expression. EYFP was expressed in different quantities throughout most cell types, including islet endocrine and stromal cells. No adverse effects of the transgene on animal health, growth or fertility were observed. Likewise, in vivo glucose homeostasis, mean arterial blood pressure and regional blood flow values were normal. Furthermore, the transgenic YC-3.0 mouse had a normal beta-cell volume and mass as well as glucose-stimulated insulin release in vitro, compared with the C57BL/6 control mouse. Isolated islets from YC-3.0 animals continuously expressed the transgene and reversed hyperglycemia when transplanted under the renal capsule of alloxan-diabetic nude mice. We conclude that isolated pancreatic islets from YC-3.0 animals implanted into recipients without any EYFP expression, constitute a novel and versatile model for studies of islet engraftment.