Developmental stage-specific differentiation of stem or progenitor cells into safe and functional cells is of fundamental importance in regenerative medicine, including β-cell replacement. However, the differentiation of islet progenitor cells (IPCs) into insulin-secreting β cells remains elusive. Here, we report that the multifunctional molecule nicotinamide (NIC) is a specific differentiation regulator of mouse IPCs. The differentiated cells regulated by NIC exhibited many characteristics of adult β cells, including ameliorating preclinical diabetes and a highly comparable transcriptome profile. Gene set enrichment analysis showed that during differentiation, numerous IPC transcription factor genes, including Ngn3, Pax4, Fev, and Mycl1, were all down regulated. Pharmacological, biochemical, and gene knockdown analyses collectively demonstrated that NIC regulated the differentiation via inhibiting Sirt1 (silent information regulator transcript 1). Finally, NIC also regulates human IPC differentiation. Thus, our study advances islet developmental biology and impacts on translational research and regenerative therapies to diabetes and other diseases.