Stem cell-derived insulin-producing beta cells (SC-β) offer an inexhaustible supply of functional β cells for cell replacement therapies and disease modeling for diabetes. While successful directed differentiation protocols for this cell type have been described, the mechanisms controlling its differentiation and function are not fully understood. Here we report that the Hippo pathway controls the proliferation and specification of pancreatic progenitors into the endocrine lineage. Downregulation of YAP, an effector of the pathway, enhances endocrine progenitor differentiation and the generation of SC-β cells with improved insulin secretion. A chemical inhibitor of YAP acts as an inducer of endocrine differentiation and reduces the presence of proliferative progenitor cells. Conversely, sustained activation of YAP results in impaired differentiation, blunted glucose-stimulated insulin secretion, and increased proliferation of SC-β cells. Together these results support a role for YAP in controlling the self-renewal and differentiation balance of pancreatic progenitors and limiting endocrine differentiation in vitro.