Epithelial metaplasia occurs when one predominant cell type in a tissue is replaced by another, and is frequently associated with an increased risk of subsequent neoplasia. In both mouse and human pancreas, acinar-to-ductal metaplasia has been implicated in the generation of cancer precursors. We show that pancreatic epithelial explants undergo spontaneous acinar-to-ductal metaplasia in response to EGFR signaling, and that this change in epithelial character is associated with the appearance of nestin-positive transitional cells. Lineage tracing involving Cre/lox-mediated genetic cell labeling reveals that acinar-to-ductal metaplasia represents a true transdifferentiation event, mediated by initial dedifferentiation of mature exocrine cells to generate a population of nestin-positive precursors, similar to those observed during early pancreatic development. These results demonstrate that a latent precursor potential resides within mature exocrine cells, and that this potential is regulated by EGF receptor signaling. In addition, these observations provide a novel example of rigorously documented transdifferentiation within mature mammalian epithelium, and suggest that plasticity of mature cell types may play a role in the generation of neoplastic precursors.