Transdifferentiation is the conversion of one differentiated cell type to another with or without intervening cell division. We have previously demonstrated that treatment of the pancreatic cell line, AR42J-B13 (B13) with the glucocorticoid Dexamethosone (Dex) induces a transdifferentiation to a hepatic phenotype. Previously, we have demonstrated that a range of pancreatic markers are down regulated and liver markers are induced during transdifferentiation. Here we have described our analysis of the functional nature of the transdifferentiated hepatocytes. The normal liver plays a major role in metabolic homeostasis, synthesis of plasma proteins, enzymes and cofactors and is crucial for detoxification. We determined the ability of the transdifferentiated hepatocytes to synthesise urea, glycogen, receptor mediated uptake of low density lipoproteins and metabolise xenobiotics via Phase I metabolising enzymes. Additionally, we have shown that the transdifferentiated hepatocytes are delineated directly from the pancreatic cells with no intervening cell division. For the first time, we describe here that transdifferentiated hepatocytes are able to integrate into the liver when transplanted into NOD/SCID mice. Our results give every indication that hepatocytes transdifferentiated from pancreatic cells are an effective model for studying liver function and have the potential to rescue liver disease.