Portions of pancreases from fetal rats (normal or alloxan diabetic mothers) of 19.5 days were grown in organ culture for four days on either a low glucose medium (162 to 170 mg. glucose per 100 ml.) or a high glucose medium (1,031 to 1,073 mg. glucose per 100 ml.). Certain cultures were fixed for microscopic study. Other cultures were transplanted to the mothers at two sites: into the anterior chamber of the eye and under the capsule of the kidney. Four or ten days later, the grafts were removed, fixed and prepared for microscopic study. Pancreases of fetuses from normal mothers had granulated beta cells at the time of explantation. When explants were grown on the high glucose medium, the beta cells became degranulated—the insulin stored at the time of explant was released from the beta cells. Subsequent transplantation of such cultures into the normal mothers restored the beta cell granulation, i.e., new insulin was synthesized and stored within the beta cells. Pancreases of fetuses from alloxanized diabetic mothers had de granulated beta cells at the time of explantation. When these explants were grown on the low glucose medium, the beta cells developed extensive granulation representing a synthesis and storage of insulin. Following subsequent transplantation of such cultures into the diabetic mothers, the beta cells became degranulated, i.e., release of stored insulin from the beta cells. These observations indicate that the beta cells maintain their functional integrity (ability to store or release insulin in response to glucose) both in organ culture and when subsequently grown as grafts in maternal hosts.