Pancreatic rudiments from E12.5 mouse embryos undergo extensive development and differentiation when cultured in three-dimensional gels of extracellular matrix proteins for up to 12 days. Whereas collagen gels promote the formation of numerous exocrine acini and relatively small clusters of endocrine cells, in basement membrane (EHS) matrices the development of endocrine cells is dramatically favoured over that of acinar tissue. Buds embedded in a collagen gel contiguous to an EHS gel also fail to develop acini, suggesting the involvement of diffusible factor(s). Addition of cytokines to cultures of pancreatic buds in collagen gels modifies the relative proportions of the epithelial components of the gland. In the presence of EGF the proportion of the tissue occupied by ducts overrides that of acinar structures, whereas the endocrine portion of the tissue is not significantly modified. TGF-beta 1 partially mimicks the effect of EHS matrix in inhibiting the development of acinar tissue without decreasing the amount of ducts and mesenchyme; TGF-beta 1 also promotes the development of endocrine cells, in particular of insulin-containing beta cells and of cells expressing genes of the PP-fold family. These results show that cytokines can modulate the development of the pancreas and suggest a role for TGF-beta 1 in regulating the balance between the acinar and endocrine portions of the gland in vivo. More generally, they are compatible with the notion that, during organogenesis, cytokines act as paracrine factors responsible for the development and maintenance of appropriate proportions of different tissue constituents.