BACKGROUND: The liver and the pancreas arise from adjacent regions of endoderm in embryonic development. Pdx1 is a key transcription factor that is essential for the development of the pancreas and is not expressed in the liver. The aim of this study was to determine whether a gene overexpression protocol based on Pdx1 would be able to cause conversion of liver to pancreas. RESULTS: We show that a modified form of Pdx1, carrying the VP16 transcriptional activation domain, can cause conversion of liver to pancreas, both in vivo and in vitro. Transgenic Xenopus tadpoles carrying the construct TTR-Xlhbox8-VP16:Elas-GFP were prepared. Xlhbox8 is the Xenopus homolog of Pdx1, the TTR (transthyretin) promoter directs expression to the liver, and the GFP is under the control of an elastase promoter and provides a real-time visible marker of pancreatic differentiation. In the transgenic tadpoles, part or all of the liver is converted to pancreas, containing both exocrine and endocrine cells, while liver differentiation products are lost from the regions converted to pancreas. The timing of events is such that the liver is differentiating by the time Xlhbox8-VP16 is expressed, so we consider this a transdifferentiation event rather than a reprogramming of embryonic development. Furthermore, this same construct will bring about transdifferentiation of human hepatocytes in culture, with formation of both exocrine and endocrine cells. CONCLUSIONS: We consider that the conversion of liver to pancreas could be the basis of a new type of therapy for insulin-dependent diabetes. Although expression of the transgene is transient, once the ectopic pancreas is established, it persists thereafter.