OBJECTIVE: Pancreatic-derived factor (PANDER, FAM3B) is a pancreatic islet-specific cytokine-like protein that is secreted from beta-cells upon glucose stimulation. The biological function of PANDER is unknown, and to address this we generated and characterized a PANDER knockout mouse. RESEARCH DESIGN AND METHODS: To generate the PANDER knockout mouse, the PANDER gene was disrupted and its expression was inhibited by homologous recombination via replacement of the first two exons, secretion signal peptide and transcriptional start site, with the neomycin gene. PANDER(-/-) mice were then phenotyped by a number of in vitro and in vivo tests to evaluate potential effects on glucose regulation, insulin sensitivity, and beta-cell morphology and function. RESULTS: Glucose tolerance tests demonstrated significantly higher blood glucose levels in PANDER(-/-) versus wild-type male mice. To identify the mechanism of the glucose intolerance, insulin sensitivity and pancreatic beta-cell function were examined. Hyperinsulinemic-euglycemic clamps and insulin tolerance testing showed similar insulin sensitivity for both the PANDER(-/-) and wild-type mice. The in vivo insulin response following intraperitoneal glucose injection surprisingly produced significantly higher insulin levels in the PANDER(-/-) mice, whereas insulin release was blunted with arginine administration. Islet perifusion and calcium imaging studies showed abnormal responses of the PANDER(-/-) islets to glucose stimulation. In contrast, neither islet architecture nor insulin content was impacted by the loss of PANDER. Interestingly, the elevated insulin levels identified in vivo were attributed to decreased hepatic insulin clearance in the PANDER(-/-) islets. Taken together, these results demonstrated decreased pancreatic beta-cell function in the PANDER(-/-) mouse. CONCLUSIONS: These results support a potential role of PANDER in the pancreatic beta-cell for regulation or facilitation of insulin secretion.