The regenerative process in the pancreas is of particular interest because diabetes results from an inadequate number of insulin-producing beta cells and pancreatic cancer may arise from the uncontrolled growth of progenitor/stem cells. Continued and substantial growth of islet tissue occurs after birth in rodents and humans, with additional compensatory growth in response to increased demand. In rodents there is clear evidence of pancreatic regeneration after some types of injury, with proliferation of preexisting differentiated cell types accounting for some replacement. Additionally, neogenesis or the budding of new islet cells from pancreatic ducts has been reported, but the existence and identity of a progenitor cell have been debated. We hypothesized that the progenitor cells are duct epithelial cells that after replication undergo a regression to a less differentiated state and then can form new endocrine and exocrine pancreas. To directly test whether ductal cells serve as pancreatic progenitors after birth and give rise to new islets, we generated transgenic mice expressing human carbonic anhydrase II (CAII) promoter: Cre recombinase (Cre) or inducible CreER^TM to cross with ROSA26 loxP-Stop-loxP LacZ reporter mice. We show that CAII-expressing cells within the pancreas act as progenitors that give rise to both new islets and acini normally after birth and after injury (ductal ligation). This identification of a differentiated pancreatic cell type as an in vivo progenitor of all differentiated pancreatic cell types has implications for a potential expandable source for new islets for replenishment therapy for diabetes.