PACAP belongs to the vasoactive intestinal polypeptide (VIP)/secretin/glucagon superfamily, which also includes glucagon-like peptide 1 (GLP-1) and glucose-dependent insulinotropic peptide (GIP). PACAP shares an insulinotropic property with the latter two peptides; for instance, it stimulates insulin secretion from islets in a glucose-dependent manner at femtomolar concentrations. However, the pathophysiological significance of PACAP in diabetes remains largely unknown, for several reasons, including a lack of low-molecular weight PACAP ligands and a lack of suitable animal models. As an approach to understanding PACAP's pancreatic function in vivo, we have recently generated transgenic mice overexpressing PACAP in islet beta cells under the control of human insulin promoter (Tg mice). As a consequence, it has been demonstrated that in addition to stimulating insulin secretion, PACAP has long-term effects on pancreatic endocrine cells, including proliferation of beta cells during streptozotocin-induced diabetes development as well as aging. These observations provide additional information to support the possibility that drugs associated with PACAP-signaling pathways might be of therapeutic value for the treatment of diabetes. In this review, we briefly summarize these previous studies using Tg mice and also focus on the physiological and pathophysiological roles mediated by PACAP during diabetes development.