Differentiation of early gut endoderm cells into the endocrine cells forming the pancreatic islets of Langerhans depends on a cascade of gene activation events controlled by transcription factors including the basic helix-loop-helix (bHLH) proteins. To delineate this cascade, we began by establishing the position of neurogenin3, a bHLH factor found in the pancreas during fetal development. We detect neurogenin3 immunoreactivity transiently in scattered ductal cells in the fetal mouse pancreas, peaking at embryonic day 15.5. Although not detected in cells expressing islet hormones or the islet transcription factors Isl1, Brn4, Pax6 or PDX1, neurogenin3 is detected along with early islet differentiation factors Nkx6.1 and Nkx2.2, establishing that it is expressed in immature cells in the islet lineage. Analysis of transcription factor-deficient mice demonstrates that neurogenin3 expression is not dependent on neuroD1/BETA2, Mash1, Nkx2.2, Nkx6.1, or Pax6. Furthermore, early expression of neurogenin3 under control of the Pdx1 promoter is alone sufficient to drive early and ectopic differentiation of islet cells, a capability shared by the pancreatic bHLH factor, neuroD1/BETA2, but not by the muscle bHLH factor, MyoD. However, the islet cells produced in these transgenic experiments are overwhelmingly (alpha) cells, suggesting that factors other than the bHLH factors are required to deviate from a default * cell fate. These data support a model in which neurogenin3 acts upstream of other islet differentiation factors, initiating the differentiation of endocrine cells, but switching off prior to final differentiation. The ability to uniquely identify islet cell precursors by neurogenin3 expression allows us to determine the position of other islet transcription factors in the differentiation cascade and to propose a map for the islet cell differentiation pathway.