Development of the endocrine pancreas includes a series of early events wherein precursor cells cluster, that is migrate to form cell aggregates, which subsequently differentiate into islets of Langerhans. We show that PANC-1 cells, a human pancreatic cell line, differentiates into hormone-producing islet-like cell aggregates after exposure to a defined serum-free medium. These cells were used to provide the following evidence that fibroblast growth factor (FGF)2 is a paracrine chemoattractant during PANC-1 cell clustering: (i) FGF2 is secreted and remains bound to the extracellular matrix from where it may diffuse to form chemoattractive gradients; (ii) a subset of cells expresses FGF receptors (FGFRs) -1, -2, -3, and -4; (iii) inhibition of FGFR tyrosine kinase inhibits cell clustering; and (iv) FGF2 neutralizing antibody inhibits clustering. In addition, adult human islet-derived precursor cells, which cluster and differentiate in a manner similar to PANC-1 cells, also secrete FGF2 and express FGFRs. We conclude that FGF2, acting as a paracrine chemoattractant, stimulates clustering of precursor cells, an early step leading to islet-like cell aggregate formation. Similar processes may occur during development of the islet of Langerhans in humans.