Protection or restoration of pancreatic β-cell mass as a therapeutic treatment for type 1 diabetes requires understanding of the mechanisms that drive the specification and development of pancreatic endocrine cells. Septins are filamentous small GTPases that function in the regulation of cell division, cytoskeletal organization and membrane remodeling, and are involved in various tissue-specific developmental processes. However, their role in pancreatic endocrine cell differentiation remains unknown. Here we show by functional manipulation techniques in transgenic zebrafish lines that suppression of sept7b, the zebrafish ortholog of human SEPT7, profoundly increases the number of endocrine progenitors but limits their differentiation, leading to reduction in β- and α-cell mass. Furthermore, we discovered that shh (sonic hedgehog) expression in the endoderm, essential for the development of pancreatic progenitors of the dorsal pancreatic bud, is absent in larvae depleted of sept7b. We also discovered that sept7b is important for the differentiation of ventral pancreatic bud-derived cells: sept7b-depleted larvae exhibit downregulation of Notch receptors notch1a and notch1b and show precocious differentiation of NeuroD-positive endocrine cells in the intrapancreatic duct and gut epithelium. Collectively, this study provides a novel insight into the development of pancreatic endocrine progenitors, revealing an essential role for sept7b in endocrine progenitor differentiation.