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 β- and α-cells in both the nucleus and cytoplasm. As DREAM regulates neuronal dynorphin expression, we determined whether this pathway is affected in DREAM−/− islets. Under low glucose conditions, with intracellular calcium concentrations of <100 nM, DREAM−/− 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 (<100 nM) conditions, inhibiting PDN transcription in β-cells. Furthermore, β-cells treated with high glucose (20 mM) show increased cytoplasmic calcium (∼200 nM), which eliminates DREAM's interaction with the DRE, causing increased PDN promoter activity. As PDN is cleaved into dynorphin peptides, which stimulate κ-opioid receptors expressed predominantly in α-cells of the islet, we determined the role of dynorphin A-(1–17) in glucagon secretion from the α-cell. Stimulation with dynorphin A-(1–17) caused α-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 suggest a role for dynorphin regulation of α-cell glucagon secretion. The data provide a molecular basis for opiate stimulation of glucagon secretion first observed over 25 years ago.