Transient neonatal diabetes mellitus (TNDM) is a rare inherited diabetic syndrome apparent in the first weeks of life and again during early adulthood. The relative contributions of reduced islet beta cell number and impaired beta cell function to the observed hypoinsulinemia are unclear. The inheritance pattern of this imprinted disorder implicates overexpression of one or both genes within the TNDM locus: ZAC, which encodes a proapoptotic zinc finger protein, and HYMAI, which encodes an untranslated mRNA. To investigate the consequences for pancreatic function, we have developed a high-copy transgenic mouse line, TNDM29, carrying the human TNDM locus. TNDM29 neonates display hyperglycemia, and older adults, impaired glucose tolerance. Neonatal hyperglycemia occurs only on paternal transmission, analogous to paternal dependence of TNDM in humans. Embryonic pancreata of TNDM29 mice showed reductions in expression of endocrine differentiation factors and numbers of insulin-staining structures. By contrast, beta cell mass was normal or elevated at all postnatal stages, whereas pancreatic insulin content in neonates and peak serum insulin levels after glucose infusion in adults were reduced. Expression of human ZAC and HYMAI in these transgenic mice thus recapitulates key features of TNDM and implicates impaired development of the endocrine pancreas and beta cell function in disease pathogenesis.