We investigated how human proislet peptide (HIP) regulates differentiation of human fetus–derived pancreatic progenitor cells (HFPPCs) and explored the potential link between HIP signaling and the menin pathway, which is key to regulating pancreatic islet differentiation. The data show that HIP promoted expression of proislet transcription factors (TFs), including PDX-1, MAFA, and NKX6.1, as well as other maturation markers of β-cells, such as insulin, GLUT2, KIR6.2, SUR1, and VDCC. Moreover, HIP increased insulin content and promoted the ability of HFPPCs to normalize blood glucose in diabetic mice. HIP inhibited the TF FOXO1 by increasing AKT-mediated phosphorylation. HIP-induced repression of FOXO1 suppressed menin expression, leading to reducing menin binding to the promoter of the three key proislet TFs, decreasing recruitment of H3K9 methyltransferase SUV39H1, and thus reducing repressive H3K9me3 at the promoter. These coordinated actions lead to increased expression of the proislet TFs, resulting in induction of HFPPC differentiation. Consistently, constitutive activation of FOXO1 blocks HIP-induced transcription of these TFs. Together, these studies unravel the crucial role of the HIP/AKT/FOXO/menin axis in epigenetically controlling expression of proislet TFs, regulating the differentiation of HFPPCs, and normalizing blood glucose in diabetic mice.