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 beta and alpha cells in both the nucleus and cytoplasm. Since DREAM regulates neuronal dynorphin expression, we determined whether this pathway is affected in DREAM-/- islets. Under low glucose conditions, with intracellular calcium concentrations of <100nM, DREAM-/- islets had an 80% increase in PDN message compared to controls. Accordingly, DREAM interacts with the PDN promoter down stream regulatory element (DRE) under low calcium (<100nM) conditions inhibiting PDN transcription in beta cells. Furthermore, beta cells treated with high glucose (20mM) show increased cytoplasmic calcium (~200nM), which eliminates DREAM's interaction with the DRE, causing increased PDN promoter activity. As PDN is cleaved into dynorphin peptides, which stimulate kappa opioid receptors expressed predominantly in alpha cells of the islet, we determined the role of dynorphin A(1-17) in glucagon secretion from the alpha cell. Stimulation with dynorphin A(1-17) caused alpha cell calcium fluctuations and a significant increase in glucagon release. DREAM-/- 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 also suggest a role for dynorphin regulation of alpha cell glucagon secretion. The data provide a molecular basis for opiate stimulation of glucagon secretion first observed over 25 years ago.