Embedded-culture of pancreatic beta-cells derived from a transgenic mouse insulinoma (MIN6 cells) was studied in vitro and in vivo. The MIN6 cells were enmeshed in an agarose-PVMA-collagen matrix for long-term maintenance. The cells formed islet-like cell clusters (ICCs) in the mixed matrix. When 10 mmol/L nicotinamide was added to these cultures the cells secreted insulin in response to various concentrations of glucose, whereas the untreated control cells were unresponsive. Both control and nicotinamide-treated MIN6 cells exhibited normal beta-cell function for up to 35 days in the mixed matrix, and the cells were much better preserved with nicotinamide than without it. MIN6 cells were suspended in the mixed matrix with nicotinamide and transferred into diffusion chambers to create a bio-artificial endocrine pancreas (Bio-AEP). In streptozotocine-induced diabetic rats with implanted Bio-AEP but without any immunosuppressants, a return to normoglycaemia was observed for up to 12 wk or more after transplantation. Our results indicate that nicotinamide-treated MIN6 cells embedded in a mixed matrix should be useful for the study of xenotransplantation and the development of a bioartificial endocrine pancreas.