All-trans retinoic acid (RA) signals via binding to retinoic acid receptors (RARs α, β, and γ). RA directly influences expression of Pdx1, a transcription factor essential for pancreatic development and beta-cell (β-cell) maturation. In this study we follow the differentiation of cultured wild-type (WT) vs. RARβ knockout (KO) embryonic stem (ES) cells into pancreatic islet cells. We found that RARβ KO ES cells show greatly reduced expression of some important endocrine markers of differentiated islet cells, such as glucagon, islet amyloid polypeptide (Iapp), and insulin 1 (Ins1) relative to WT. We conclude that RARβ activity is essential for proper differentiation of ES cells to pancreatic endocrine cells.