The pancreas is an endodermally derived organ that initially appears as a dorsal and ventral protrusion of the primitive gut epithelium. The pancreatic progenitor cells present in these early pancreatic anlagen proliferate and eventually give rise to all pancreatic cell types. The fibroblast growth factor receptor (FGFR) 2b high-affinity ligand FGF10 has been linked to pancreatic epithelial cell proliferation, and we have shown previously that Notch signalling controls pancreatic cell differentiation by means of lateral inhibition. In the developing pancreas, activated intracellular Notch appears to be required for maintaining cells in the progenitor state, in part by blocking the expression of the pro-endocrine gene neurogenin 3 (ngn3), and hence endocrine cell differentiation. Here, we show that persistent expression of Fgf10 in the embryonic pancreas of transgenic mice also inhibits pancreatic cell differentiation, while stimulating pancreatic epithelial cell proliferation. We provide evidence that one of the effects of the persistent expression of Fgf10 in the developing pancreas is maintained Notch activation, which results in impaired expression of ngn3 within the pancreatic epithelium. Together, our data suggest a role for FGF10/FGFR2b signalling in regulation of pancreatic cell proliferation and differentiation and that FGF10/FGFR2b signalling affects the Notch-mediated lateral inhibition pathway.