Pancreatic islet β-cell insufficiency underlies pathogenesis of diabetes mellitus; thus, functional β-cell replacement from renewable sources is the focus of intensive worldwide effort. However, in vitro production of progeny that secrete insulin in response to physiological cues from primary human cells has proven elusive. Here we describe fractionation, expansion and conversion of primary adult human pancreatic ductal cells into progeny resembling native β-cells. FACS-sorted adult human ductal cells clonally expanded as spheres in culture, while retaining ductal characteristics. Expression of the cardinal islet developmental regulators Neurog3, MafA, Pdx1 and Pax6 converted exocrine duct cells into endocrine progeny with hallmark β-cell properties, including the ability to synthesize, process and store insulin, and secrete it in response to glucose or other depolarizing stimuli. These studies provide evidence that genetic reprogramming of expandable human pancreatic cells with defined factors may serve as a general strategy for islet replacement in diabetes. DOI: http://dx.doi.org/10.7554/eLife.00940.00