Although both endocrine and the exocrine pancreas display a significant capacity for tissue regeneration and renewal, the existence of progenitor cells in the adult pancreas remains uncertain. Using a model of cerulein-mediated injury and repair, we demonstrate that mature exocrine cells, defined by expression of an Elastase1 promoter, actively contribute to regenerating pancreatic epithelium through formation of metaplastic ductal intermediates. Acinar cell regeneration is associated with activation of Hedgehog (Hh) signaling, as assessed by up-regulated expression of multiple pathway components, as well as activation of a Ptch-lacZ reporter allele. Using both pharmacologic and genetic techniques, we also show that the ability of mature exocrine cells to accomplish pancreatic regeneration is impaired by blockade of Hh signaling. Specifically, attenuated regeneration in the absence of an intact Hh pathway is characterized by persistence of metaplastic epithelium expressing markers of pancreatic progenitor cells, suggesting an inhibition of redifferentiation into mature exocrine cells. Given the known role of Hh signaling in exocrine pancreatic cancer, these findings may provide a mechanistic link between injury-induced activation of pancreatic progenitors and subsequent pancreatic neoplasia.