Extracellular matrix (ECM) modulates differentiation of pancreatic beta-cells during development. However, the mechanism by which ECM proteins modulate differentiation is not totally clear. We investigated the effect of ECM proteins on differentiation beta-cells in vitro. We investigated the effect of basement membrane ECM on differentiation of AR42J cells and rat ductal cells. First, we examined the effect of reconstituted basement membrane, Matrigel on differentiation of AR42J cells induced by activin and betacellulin. Matrigel augmented insulin production and increased the expression of GLUT2, SUR1, and glucokinase. Among various transcription factors investigated, Matrigel markedly upregulated the expression of Pax6. When Pax6 was overexpressed in cells treated with activin and betacellulin, the expression of insulin was upregulated. Conversely, knockdown of Pax6 significantly reduced the insulin expression in cells cultured on Matrigel. The effects of Matrigel on insulin-production and induction of Pax6 were reproduced partially by laminin-1, a major component of Matrigel, and inhibited by anti-integrin-beta 1 antibody. Matrigel also enhanced the activation of p38 mitogen-activated kinase induced by activin and betacellulin, which was inhibited by anti-beta 1 antibody. Finally, the effect of Matrigel on differentiation was reproduced in rat cultured ductal cells, and Matrigel also increased the expression of Pax6. These results indicate that basement membrane ECM augments differentiation of pancreatic progenitor cells to insulin-secreting cells by upregulating the expression of Pax6. J. Cell. Biochem. 112: 318329, 2011. (C) 2010 Wiley-Liss, Inc.