Current evidence suggests that a multipotential endodermal progenitor cell may give rise to all islet cell phenotypes. We characterized two hormone-producing rat islet (RIN) cell lines derived from a radiation-induced islet tumor by immunocytochemistry, Northern blot analysis, and radioimmunoassay of secreted hormone. Using antisera to glucagon, insulin, and somatostatin, we found that less than 15% of the cells in any of these three islet cell lines contained immunopositive cells. The number of cells staining for the hormone correlated with mRNA levels and immunoreactive secreted hormones. Sodium butyrate, a short-chain aliphatic fatty acid, slowed cell growth and increased dramatically the percentage of cells staining for glucagon and insulin. The increase in immunopositive cells was accompanied by an increase in glucagon and insulin mRNAs and secreted glucagon and insulin. These observations indicate that sodium butyrate increases glucagon and insulin gene expression by recruiting previously immunonegative cells to produce hormone. The relationship of DNA synthesis and hormone production was assessed by pulse-labeling RIN cells with [3H]thymidine, which was followed by autoradiography and immunocytochemistry. [3H]thymidine incorporation was observed in a lower percentage of immunopositive compared with immunonegative cells. Furthermore, sodium butyrate reduced the number of [3H]thymidine-labeled cells and increased the number of immunopositive cells. These observations suggest that sodium butyrate differentiates the islet cells and thereby increases the expression of the glucagon and insulin genes.