Diabetes is a disease of increasing prevalence in the general population and of unknown cause. Diabetes is manifested as hyperglycemia due to a relative deficiency of the production of insulin by the pancreatic beta-cells. One determinant in the development of diabetes is an inadequate mass of beta-cells, either absolute (type 1, juvenile diabetes) or relative (type 2, maturity-onset diabetes). Earlier, we reported that the intestinal hormone glucagon-like peptide I (GLP-I) effectively augments glucose-stimulated insulin secretion. Here we report that exendin-4, a long-acting GLP-I agonist, stimulates both the differentiation of beta-cells from ductal progenitor cells (neogenesis) and proliferation of beta-cells when administered to rats. In a partial pancreatectomy rat model of type 2 diabetes, the daily administration of exendin-4 for 10 days post-pancreatectomy attenuates the development of diabetes. We show that exendin-4 stimulates the regeneration of the pancreas and expansion of beta-cell mass by processes of both neogenesis and proliferation of beta-cells. Thus, GLP-I and analogs thereof hold promise as a novel therapy to stimulate beta-cell growth and differentiation when administered to diabetic individuals with reduced beta-cell mass.