Through the analysis of genetically modified mice a hierarchy of transcription factors regulating pancreas specification, endocrine destiny as well as endocrine subtype specification and differentiation has been established. In addition to conventional approaches such as transgenic technologies and gene targeting, recombinase fate mapping in mice has been key in establishing the lineage relationship between progenitor cells and their progeny in understanding pancreas formation. Moreover, the design of specific mouse models to conditionally express transcription factors in different populations of progenitor cells has revealed to what extent transcription factors required for islet cell development are also sufficient to induce endocrine differentiation and the importance of the competence of progenitor cells to respond to the genetic program implemented by these factors. Taking advantage of this basic science knowledge acquired in rodents, immature insulin-producing cells have recently been differentiated in vitro from human embryonic stem cells. Taken together these major advances emphasize the need to gain further in-depth knowledge of the molecular and cellular mechanisms controlling beta-cell differentiation in mice to generate functional beta-cells in the future that could be used for cell therapy in diabetes.