Embryonic stem (ES) cells display the ability to differentiate in vitro into a variety of cell lineages. Using a cell-trapping system, we have obtained an insulin-secreting cell clone from undifferentiated ES cells. The construction used allows the expression of a neomycin selection system under the control of the regulatory regions of the human insulin gene. The chimeric gene also contained a hygromycin resistance gene (pGK-hygro) to select transfected cells. A resulting clone (IB/3x-99) containing 16.5 ng/microg protein of total insulin displays regulated hormone secretion in vitro in the presence of various secretagogues. Clusters obtained from this clone were implanted (1 x 10(6) cells) in the spleen of streptozotocin-induced diabetic animals. Transplanted animals correct hyperglycemia within 1 week and restore body weight in 4 weeks. Whereas an intraperitoneal glucose tolerance test showed a slower recovery in transplanted versus control mice, blood glucose normalization after a challenge meal was similar. This approach opens new possibilities for tissue transplantation in the treatment of type 1 and type 2 diabetes and offers an alternative to gene therapy.