Both endocrine and exocrine pancreatic cells arise from pancreatic-duodenal homeobox 1 (pdx1)-positive progenitors. The molecular mechanisms controlling cell fate determination and subsequent proliferation, however, are poorly understood. Unlike endocrine cells, less is known about exocrine cell specification. We report here the identification and characterization of a novel exocrine cell determinant gene, exocrine differentiation and proliferation factor (exdpf), which is highly expressed in the exocrine cell progenitors and differentiated cells of the developing pancreas in zebrafish. Knockdown of exdpf by antisense morpholino caused loss or significant reduction of exocrine cells due to lineage-specific cell cycle arrest but not apoptosis, whereas the endocrine cell mass appeared normal. Real-time PCR results demonstrated that the cell cycle arrest is mediated by up-regulation of cell cycle inhibitor genes p21Cip, p27Kip, and cyclin G1 in the exdpf morphants. Conversely, overexpression of exdpf resulted in an overgrowth of the exocrine pancreas and a severe reduction of the endocrine cell mass, suggesting an inhibitory role for exdpf in endocrine cell progenitors. We show that exdpf is a direct target gene of pancreas-specific transcription factor 1a (Ptf1a), a transcription factor critical for exocrine formation. Three consensus Ptf1a binding sites have been identified in the exdpf promoter region. Luciferase assay demonstrated that Ptf1a promotes transcription of the exdpf promoter. Furthermore, exdpf expression in the exocrine pancreas was lost in ptf1a morphants, and overexpression of exdpf successfully rescued exocrine formation in ptf1a-deficient embryos. Genetic evidence places expdf downstream of retinoic acid (RA), an instructive signal for pancreas development. Knocking down exdpf by morpholino abolished ectopic carboxypeptidase A (cpa) expression induced by RA. On the other hand, exdpf mRNA injection rescued endogenous cpa expression in embryos treated with diethylaminobenzaldehyde, an inhibitor of RA signaling. Moreover, exogenous RA treatment induced anterior ectopic expression of exdpf and trypsin in a similar pattern. Our study provides a new understanding of the molecular mechanisms controlling exocrine cell specification and proliferation by a novel gene, exdpf. Highly conserved in mammals, the expression level of exdpf appears elevated in several human tumors, suggesting a possible role in tumor pathogenesis.