Abstract: The present invention provides mammalian pancreatic progenitor cells (“small cells”) and methods for their isolation and propagation. The pancreatic small cells are derived from adult pancreatic tissue and are characterised by their small size. The small cells are quiescent or undergo a very slow cell cycle when maintained in cell culture. Small cells secrete synaptophysin and islet hormones and are predominantly found in small, growing islets as small clusters. The present invention further provides for the use of the pancreatic small cells in transplantation and the treatment of diabetes mellitus, and for the genetic engineering of the small cells in order to produce recombinant proteins in vivo.