Cell adhesion molecules (CAMs) are important mediators of cell-cell interactions and regulate cell fate determination by influencing growth, differentiation, and organization within tissues. The human pancarcinoma antigen KSA is a glycoprotein of 40 kD originally identified as a marker of rapidly proliferating tumors of epithelial origin. Interestingly, most normal epithelia also express this antigen, although at lower levels, suggesting that a dynamic regulation of KSA may occur during cell growth and differentiation. Recently, evidence has been provided that this glycoprotein may function as an epithelial cell adhesion molecule (Ep-CAM). Here, we report that Ep-CAM exhibits the features of a morphoregulatory molecule involved in the development of human pancreatic islets. We demonstrate that Ep-CAM expression is targeted to the lateral domain of epithelial cells of the human fetal pancreas, and that it mediates calcium-independent cell-cell adhesion. Quantitative confocal immunofluorescence in fetal pancreata identified the highest levels of Ep-CAM expression in developing islet-like cell clusters budding from the ductal epithelium, a cell compartment thought to comprise endocrine progenitors. A surprisingly reversed pattern was observed in the human adult pancreas, displaying low levels of Ep-CAM in islet cells and high levels in ducts. We further demonstrate that culture conditions promoting epithelial cell growth induce upregulation of Ep-CAM, whereas endocrine differentiation of fetal pancreatic epithelial cells, transplanted in nude mice, is associated with a downregulation of Ep-CAM expression. In addition, a blockade of Ep-CAM function by KS1/4 mAb induced insulin and glucagon gene transcription and translation in fetal pancreatic cell clusters. These results indicate that developmentally regulated expression and function of Ep-CAM play a morphoregulatory role in pancreatic islet ontogeny.