Genes encoding homeodomain-containing proteins potentially involved in endocrine pancreas development were isolated by combined in silico and nested-PCR approaches. One such transcription factor, Arx, exhibits Ngn3-dependent expression throughout endocrine pancreas development in alpha, beta-precursor, and delta cells. We have used gene targeting in mouse embryonic stem cells to generate Arx loss-of-function mice. Arx-deficient animals are born at the expected Mendelian frequency, but develop early-onset hypoglycemia, dehydration, and weakness, and die 2 d after birth. Immunohistological analysis of pancreas from Arx mutants reveals an early-onset loss of mature endocrine alpha cells with a concomitant increase in beta-and delta-cell numbers, whereas islet morphology remains intact. Our study indicates a requirement of Arx for alpha-cell fate acquisition and a repressive action on beta-and delta-cell destiny, which is exactly the opposite of the action of Pax4 in endocrine commitment. Using multiplex reverse transcriptase PCR (RT-PCR), we demonstrate an accumulation of Pax4 and Arx transcripts in Arx and Pax4 mutant mice, respectively. We propose that the antagonistic functions of Arx and Pax4 for proper islet cell specification are related to the pancreatic levels of the respective transcripts.