Certain nutrients, pharmacological agents and growth factors can stimulate pancreatic beta-cell proliferation; however, mitogenic signal transduction pathways in beta-cells have not been particularly well characterized. As a model system we have focussed on characterizing the signal transduction pathways immediately downstream of the IGF-I and GH receptors in beta-cells. The original idea was to gain an idea of important elements in mitogenic signaling pathways which might then be exploited to generate a marked increase in beta-cell proliferation. Such an approach could eventually reveal a means to increase the number of human pancreatic endocrine cells in vitro, in order to obtain an abundant source of beta-cells for routine transplantation therapy of type-I diabetes. However, in the course of our studies, we have also unveiled an unexpected insight into the pathogenesis of obesity-linked type-II diabetes. It has been observed that free fatty acids inhibit glucose- and glucose-dependent IGF-I/GH-induced beta-cell proliferation. We hypothesize that a gradual accumulation of intracellular fat in beta-cells during obesity can eventually lead to an inhibition of beta-cell mass expansion and hence failure to compensate for peripheral insulin resistance, so that type-II diabetes ensues.