The delineation of regulatory networks involved in early endocrine pancreas specification will play a crucial role in directing the differentiation of embryonic stem cells toward the mature phenotype of beta cells for cell therapy of type 1 diabetes. The transcription factor Ngn3 is required for the specification of the endocrine lineage, but its direct targets and the scope of biological processes it regulates remain elusive. We show that stepwise differentiation of embryonic stem cells using successive in vivo patterning signals can lead to simultaneous induction of Ptf1a and Pdx1 expression. In this cellular context, Ngn3 induction results in upregulation of its known direct target genes within 12 hours. Microarray gene expression profiling at distinct time points following Ngn3 induction suggested novel and diverse roles of Ngn3 in pancreas endocrine cell specification. Induction of Ngn3 expression results in regulation of the Wnt, integrin, Notch, and transforming growth factor beta signaling pathways and changes in biological processes affecting cell motility, adhesion, the cytoskeleton, the extracellular matrix, and gene expression. Furthermore, the combination of in vivo patterning signals and inducible Ngn3 expression enhances ESC differentiation toward the pancreas endocrine lineage. This is shown by strong upregulation of endocrine lineage terminal differentiation markers and strong expression of the hormones glucagon, somatostatin, and insulin. Importantly, all insulin(+) cells are also C-peptide(+), and glucose-dependent insulin release was 10-fold higher than basal levels. These data suggest that bona fide pancreas endocrine cells have been generated and that timely induction of Ngn3 expression can play a decisive role in directing ESC differentiation toward the endocrine lineage.