Calcium-binding proteins regulate transcription and secretion of pancreatic islet hormones. Here, we demonstrate neuroendocrine expression of the calcium-binding downstream regulatory element antagonistic modulator (DREAM) and its role in glucose-dependent regulation of prodynorphin (PDN) expression. DREAM is distributed throughout -and ␣-cells in both the nucleus and cytoplasm. As DREAM regulates neuronal dynorphin expression, we determined whether this pathway is affected in DREAM Ϫ/Ϫ islets. Under low glucose conditions, with intracellular calcium concentrations of Ͻ100 nM, DREAM Ϫ/Ϫ islets had an 80% increase in PDN message compared with controls. Accordingly, DREAM interacts with the PDN promoter downstream regulatory element (DRE) under low calcium (Ͻ100 nM) conditions, inhibiting PDN transcription in -cells. Furthermore, -cells treated with high glucose (20 mM) show increased cytoplasmic calcium (ϳ200 nM), which eliminates DREAM's interaction with the DRE, causing increased PDN promoter activity. As PDN is cleaved into dynorphin peptides, which stimulate -opioid receptors expressed predominantly in ␣-cells of the islet, we determined the role of dynorphin A-(1-17) in glucagon secretion from the ␣-cell. Stimulation with dynorphin A-(1-17) caused ␣-cell calcium fluctuations and a significant increase in glucagon release. DREAM Ϫ/Ϫ islets also show elevated glucagon secretion in low glucose compared with controls. These results demonstrate that PDN transcription is regulated by DREAM in a calcium-dependent manner and suggest a role for dynorphin regulation of ␣-cell glucagon secretion. The data provide a molecular basis for opiate stimulation of glucagon secretion first observed over 25 years ago.