Cell replacement therapy for diabetes mellitus requires cost-effective generation of high-quality, insulin-producing, pancreatic β cells from pluripotent stem cells. Development of this technique has been hampered by a lack of knowledge of the molecular mechanisms underlying β-cell differentiation. The present study identified reserpine and tetrabenazine (TBZ), both vesicular monoamine transporter 2 (VMAT2) inhibitors, as promoters of late-stage differentiation of Pdx1-positive pancreatic progenitor cells into Neurog3 (referred to henceforth as Ngn3)-positive endocrine precursors. VMAT2-controlled monoamines, such as dopamine, histamine and serotonin, negatively regulated β-cell differentiation. Reserpine or TBZ acted additively with dibutyryl adenosine 3',5'-cyclic AMP, a cell-permeable cAMP analog, to potentiate differentiation of embryonic stem (ES) cells into β cells that exhibited glucose-stimulated insulin secretion. When ES cell-derived β cells were transplanted into AKITA diabetic mice, the cells reversed hyperglycemia. Our protocol provides a basis for the understanding of β-cell differentiation and its application to a cost-effective production of functional β cells for cell therapy.