Human fetal pancreas (HFP) represents an ideal tissue source for transplantation into diabetic patients. Transplantation of HFP lacks many of the technical problems associated with whole organ transplantation and HFP is readily available. In order to proceed with clinical HFP transplantation it must be demonstrated that HFP can reverse experimentally induced diabetes, that HFP can respond to glucose challenge in a manner similar to adult tissue, and that the immunogenicity of HFP can be reduced. We transplanted HFP (13–17 weeks gestational age) beneath the kidney capsule of streptozotocin-induced diabetic BALB/c nu/nu mice. Within 6 to 8 weeks following transplantation, 6 out of 7 (88%) animals became normoglycemic. Oral glucose tolerance tests were performed to determine in vivo graft function. Results in cured animals 'were identical to those of normal BALB/c nu/nu mice. In vitro insulin response to glucose challenge demonstrated that grafted HFP was capable of insulin secretion in the presence of high glucose while fresh fetal tissue was not. Human passenger leukocytes, identified immunohistologically at various times after transplantation with monoclonal antibodies to HLA-DR and Leu 10, were greatly reduced by 32 weeks posttransplant. Our data demonstrate that HFP will differentiate and mature in the diabetic nude mouse and that human passenger leukocyte content can be reduced. These findings suggest that HFP is functionally suitable for transplantation into diabetic patients.