Islet transplantation is one treatment option for diabetes mellitus. However, novel sources of pancreatic islets or insulin-producing cells are required because the amount of donor tissue available is severely limited. Pancreatic ductal cells are an alternative source of β-cells because they have the potential to differentiate into insulin-producing cells. We investigated whether treatment of human pancreatic ductal cells with activin A (ActA) and exendin-4 (EX-4) stimulated transdifferentiation of the cells, both in vitro and in vivo. We treated human pancreatic ductal cells with ActA and EX-4 in high-glucose media to induce differentiation into insulin-producing cells and transplanted the cells into streptozotocin-induced diabetic nude mice. Co-treatment of mice with ActA and EX-4 promoted cell proliferation, induced expression of pancreatic β-cell-specific markers, and caused glucose-induced insulin secretion compared with the ActA or EX-4 mono-treatment groups respectively. When pancreatic ductal cells treated with ActA and EX-4 in high-glucose media were transplanted into diabetic nude mice, their blood glucose levels normalized and insulin was detected in the graft. These findings suggest that pancreatic ductal cells have a potential to replace pancreatic islets for the treatment of diabetes mellitus when the ductal cells are co-treated with ActA, EX-4, and glucose to promote their differentiation into functional insulin-producing cells.