Heterozygous mutations in the human HNF1B gene are associated with maturity-onset diabetes of the young type 5 (MODY5) and pancreas hypoplasia. In mouse, Hnf1b heterozygous mutants do not exhibit any phenotype, whereas the homozygous deletion in the entire epiblast leads to pancreas agenesis associated with abnormal gut regionalization. Here, we examine the specific role of Hnf1b during pancreas development, using constitutive and inducible conditional inactivation approaches at key developmental stages. Hnf1b early deletion leads to a reduced pool of pancreatic multipotent progenitor cells (MPCs) due to decreased proliferation and increased apoptosis. Lack of Hnf1b either during the first or the secondary transitions is associated with cystic ducts. Ductal cells exhibit aberrant polarity and decreased expression of several cystic disease genes, some of which we identified as novel Hnf1b targets. Notably, we show that Glis3, a transcription factor involved in duct morphogenesis and endocrine cell development, is downstream Hnf1b. In addition, a loss and abnormal differentiation of acinar cells are observed. Strikingly, inactivation of Hnf1b at different time points results in the absence of Ngn3 + endocrine precursors throughout embryogenesis. We further show that Hnf1b occupies novel Ngn3 putative regulatory sequences in vivo. Thus, Hnf1b plays a crucial role in the regulatory networks that control pancreatic MPC expansion, acinar cell identity, duct morphogenesis and generation of endocrine precursors. Our results uncover an unappreciated requirement of Hnf1b in endocrine cell specification and suggest a mechanistic explanation of diabetes onset in individuals with MODY5.