This invention relates to the discovery that an intermediate, differentiated stage of pancreatic stem cells exist that can be propagated in a stable manner in successive serial passaging while maintaining insulin production in response to glucose. These cells are advantageous in that they are both expandable and stable in culture and can driven to late stage development, i.e. prototype islet cells. This invention further provides for culturing techniques that select for these intermediate differentiated stage cells and selectively eliminates early or late stage pancreatic cells.