Pancreatic acini and islets are believed to differentiate from common ductal precursors through a process requiring various growth factors. Epidermal growth factor receptor (EGF-R) is expressed throughout the developing pancreas. We have analyzed here the pancreatic phenotype of EGFR deficient (−/−) mice, which generally die from epithelial immaturity within the first postnatal week. The pancreata appeared macroscopically normal. The most striking feature of the EGF-R (−/−) islets was that instead of forming circular clusters, the islet cells were mainly located in streak-like structures directly associated with pancreatic ducts. Based on BrdU-labelling, proliferation of the neonatal EGF-R (−/−) beta-cells was significantly reduced (2.6±0.4 versus 5.8±0.9%, P<0.01) and the difference persisted even at 7-11 days of age. Analysis of embryonic pancreata revealed impaired branching morphogenesis and delayed islet cell differentiation in the EGF-R (−/−) mice. Islet development was analyzed further in organ cultures of E12.5 pancreata. The proportion of insulinpositive cells was significantly lower in the EGF-R (−/−) explants (27±6 versus 48±8%, P<0.01), indicating delayed differentiation of the beta cells. Branching of the epithelium into ducts was also impaired. Matrix metalloproteinase (MMP-2 and MMP-9) activity was reduced 20% in EGF-R (−/−) late-gestation pancreata, as measured by gelatinase assays. Furthermore, the levels of secreted plasminogen activator inhibitor-1 (PAI-1) were markedly higher, while no apparent differences were seen in the levels of active uPA and tPa between EGF-R (−/−) and wild-type pancreata. Our findings suggest that the perturbation of EGF-R-mediated signalling can lead to a generalized proliferation defect of the pancreatic epithelia associated with a delay in beta cell development and disturbed migration of the developing islet cells as they differentiate from their precursors. Upregulated PAI-1 production and decreased gelatinolytic activity correlated to this migration defect. An intact EGF-R pathway appears to be a prerequisite for normal pancreatic development.