The dogma that IGF-I stimulates pancreatic islet growth has been challenged by combinational targeting of IGF or IGF-IR (IGF receptor) genes as well as β-cell–specific IGF-IR gene deficiency, which caused no defect in islet cell growth. To assess the physiological role of locally produced IGF-I, we have developed pancreatic-specific IGF-I gene deficiency (PID) by crossing Pdx1-Cre and IGF-I/loxP mice. PID mice are normal except for decreased blood glucose level and a 2.3-fold enlarged islet cell mass. When challenged with low doses of streptozotocin, control mice developed hyperglycemia after 6 days that was maintained at high levels for at least 2 months. In contrast, PID mice only exhibited marginal hyperglycemia after 12 days, maintained throughout the experiment. Fifteen days after streptozotocin, PID mice demonstrated significantly higher levels of insulin production. Furthermore, streptozotocin-induced β-cell apoptosis (transferase-mediated dUTP nick-end labeling [TUNEL] assay) was significantly prevented in PID mice. Finally, PID mice exhibited a delayed onset of type 2 diabetes induced by a high-fat diet, accompanied by super enlarged pancreatic islets, increased insulin mRNA levels, and preserved sensitivity to insulin. Our results suggest that locally produced IGF-I within the pancreas inhibits islet cell growth; its deficiency provides a protective environment to the β-cells and potential in combating diabetes.