Ghrelin is produced mainly by endocrine cells in the stomach and is an endogenous ligand for the growth hormone secretagogue receptor (GHS-R). It also influences feeding behavior, metabolic regulation, and energy balance. It affects islet hormone secretion, and expression of ghrelin and GHS-R in the pancreas has been reported. In human islets, ghrelin expression is highest pre- and neonatally. We examined ghrelin and GHS-R in rat islets during development with immunocytochemistry and in situ hybridization. We also studied the effect of ghrelin on insulin secretion from INS-1 (832/13) cells and the expression of GHS-R in these cells. We found ghrelin expression in rat islet endocrine cells from mid-gestation to 1 month postnatally. Islet expression of GHS-R mRNA was detected from late fetal stages to adult. The onset of islet ghrelin expression preceded that of gastric ghrelin. Islet ghrelin cells constitute a separate and novel islet cell population throughout development. However, during a short perinatal period a minor subpopulation of the ghrelin cells co-expressed glucagon or pancreatic polypeptide. Markers for cell lineage, proliferation, and duct cells revealed that the ghrelin cells proliferate, originate from duct cells, and share lineage with glucagon cells. Ghrelin dose-dependently inhibited glucose-stimulated insulin secretion from INS-1 (832/13) cells, and GHS-R was detected in the cells. We conclude that ghrelin is expressed in a novel developmentally regulated endocrine islet cell type in the rat pancreas and that ghrelin inhibits glucose-stimulated insulin secretion via a direct effect on the beta-cell.