Heterozygous mutations in HNF1B in humans result in a multisystem disorder, including pancreatic hypoplasia and diabetes mellitus. Here we used a well-controlled human induced pluripotent stem cell pancreatic differentiation model to elucidate the molecular mechanisms underlying HNF1B-associated diabetes. Our results show that lack of HNF1B blocks specification of pancreatic fate from the foregut progenitor (FP) stage, but HNF1B haploinsufficiency allows differentiation of multipotent pancreatic progenitor cells (MPCs) and insulin-secreting β-like cells. We show that HNF1B haploinsufficiency impairs cell proliferation in FPs and MPCs. This could be attributed to impaired induction of key pancreatic developmental genes, including SOX11, ROBO2, and additional TEAD1 target genes whose function is associated with MPC self-renewal. In this work we uncover an exhaustive list of potential HNF1B gene targets during human pancreas organogenesis whose downregulation might underlie HNF1B-associated diabetes onset in humans, thus providing an important resource to understand the pathogenesis of this disease.