In most mammals the pancreas develops from the foregut endoderm as ventral and dorsal buds. These buds fuse and develop into a complex organ composed of endocrine, exocrine and ductal components. This developmental process depends upon an integrated network of transcription factors. Gene targeting experiments have revealed critical roles for Pdx1, Isl1, Pax4, Pax6 and Nkx2-2 (refs 3,4,5,6,7, 8,9,10). The homeobox gene HLXB9 (encoding HB9) is prominently expressed in adult human pancreas, although its role in pancreas development and function is unknown. To facilitate its study, we isolated the mouse HLXB9 orthologue, Hlxb9. During mouse development, the dorsal and ventral pancreatic buds and mature beta-cells in the islets of Langerhans express Hlxb9. In mice homologous for a null mutation of Hlxb9, the dorsal lobe of the pancreas fails to develop. The remnant Hlxb9-/- pancreas has small islets of Langerhans with reduced numbers of insulin-producing beta-cells. Hlxb9-/- beta-cells express low levels of the glucose transporter Glut2 and homeodomain factor Nkx 6-1. Thus, Hlxb9 is key to normal pancreas development and function.