Preadipocyte factor-1 (Pref-1) is made as a transmembrane protein containing EGF-repeats at the extracellular domain that can be cleaved to generate a biologically active soluble form. Pref-1 is found in islet β-cells and its level has been reported to increase in neonatal rat islets upon growth hormone treatment. We found here that Pref-1 can promote growth of pancreatic tumor derived AR42J cells. To examine Pref-1 function in pancreatic islets in vivo, we generated transgenic mouse lines overexpressing the Pref-1/hFc in islet β-cells using rat insulin II promoter (RIP). These transgenic mice exhibit an increase in islet mass with higher proportion of larger islets in pancreas compared to wild-type littermates. This is in contrast to pancreas from Pref-1 null mice that show higher proportion of smaller islets. Insulin expression and insulin secretion from pancreatic islets from RIP-Pref-1/hFc transgenic mice are increased also. Thus, RIP-Pref-1/hFc transgenic mice show normal glucose levels but with higher plasma insulin levels in both fasting and fed conditions. These mice show improved glucose tolerance. Taken together, we conclude Pref-1 as a positive regulator of islet β-cells and insulin production.