In this study, we describe pancreatic cell ontogeny in renal capsule-transplanted embryonic stem cells (ES) after injury by streptozocin (STZ), showing pancreatogenesis in situ. Seven-week-old female BALB/c nude mice were treated with either a single 175- or 200-mg/kg STZ dose, a regimen that induces substantial beta-cell damage without overt hyperglycemia, and transplanted 24 hr later with 1 x 10(5) ES. Immunohistochemistry was performed on ES tissue at 15, 21, and 28 days after transplantation using antibodies against stage- and lineage-specific pancreatic markers. After 21 days, PDX-1+ pancreatic foci first appeared in the renal capsule and expressed both amylase and endocrine hormones (insulin, glucagon, and somatostatin). These foci increased in size by day 28 because of acinar and duct cell proliferation, whereas endocrine cells remained non-dividing, and made up 2-4% of ES tumor volume. PDX-1, Nkx6.1, Ngn3, and ISL-1 protein localization patterns in pancreatic foci were comparable with embryonic pancreatogenesis. A prevalence of multihormonal endocrine cells, a characteristic of adult beta-cell regeneration, indicated a possible divergence from embryonic islet cell development. The results indicate that beta-cell damage, without overt hyperglycemia, induces a process of fetal-like pancreatogenesis in renal capsule-transplanted ES, leading to beta-cell neogenesis.