Human embryonic stem cells (hESCs) are considered a potential alternative to cadaveric islets as a source of transplantable cells for treating patients with diabetes. We previously described a differentiation protocol to generate pancreatic progenitor cells from hESCs, composed of mainly pancreatic endoderm (PDX1/NKX6.1-positive), endocrine precursors (NKX2.2/synaptophysin-positive, hormone/NKX6.1-negative), and polyhormonal cells (insulin/glucagon-positive, NKX6.1-negative). However, the relative contributions of NKX6.1-negative versus NKX6.1-positive cell fractions to the maturation of functional β-cells remained unclear. To address this question, we generated two distinct pancreatic progenitor cell populations using modified differentiation protocols. Prior to transplant, both populations contained a high proportion of PDX1-expressing cells (~85%-90%) but were distinguished by their relatively high (~80%) or low (~25%) expression of NKX6.1. NKX6.1-high and NKX6.1-low progenitor populations were transplanted subcutaneously within macroencapsulation devices into diabetic mice. Mice transplanted with NKX6.1-low cells remained hyperglycemic throughout the 5-month post-transplant period whereas diabetes was reversed in NKX6.1-high recipients within 3 months. Fasting human C-peptide levels were similar between groups throughout the study, but only NKX6.1-high grafts displayed robust meal-, glucose- and arginine-responsive insulin secretion as early as 3 months post-transplant. NKX6.1-low recipients displayed elevated fasting glucagon levels. Theracyte devices from both groups contained almost exclusively pancreatic endocrine tissue, but NKX6.1-high grafts contained a greater proportion of insulin-positive and somatostatin-positive cells, whereas NKX6.1-low grafts contained mainly glucagon-expressing cells. Insulin-positive cells in NKX6.1-high, but not NKX6.1-low grafts expressed nuclear MAFA. Collectively, this study demonstrates that a pancreatic endoderm-enriched population can mature into highly functional β-cells with only a minor contribution from the endocrine subpopulation.