Insulin-producing cells (IPCs) derived from human embryonic stem cells (hESCs) hold great potential for cell transplantation therapy in diabetes. Tremendous progress has been made in inducing differentiation of hESCs into IPCs in vitro, of which definitive endoderm (DE) protocol mimicking foetal pancreatic development has been widely used. However, immaturity of the obtained IPCs limits their further applications in treating diabetes. Forkhead box O1 (FoxO1) is involved in the differentiation and functional maintenance of murine pancreatic β cells, but its role in human β cell differentiation is under elucidation. Here, we showed that although FoxO1 expression level remained consistent, cytoplasmic phosphorylated FoxO1 protein level increased during IPC differentiation of hESCs induced by DE protocol. Lentiviral silencing of FoxO1 in pancreatic progenitors upregulated the levels of pancreatic islet differentiation-related genes and improved glucose-stimulated insulin secretion response in their progeny IPCs, whereas overexpression of FoxO1 showed the opposite effects. Notably, treatment with the FoxO1 inhibitor AS1842856 displayed similar effects with FoxO1 knockdown in pancreatic progenitors. These effects were closely associated with the mutually exclusive nucleocytoplasmic shuttling of FoxO1 and Pdx1 in the AS1842856-treated pancreatic progenitors. Our data demonstrated a promising effect of FoxO1 inhibition by the small molecule on gene expression profile during the differentiation, and in turn, on determining IPC maturation via modulating subcellular location of FoxO1 and Pdx1. Therefore, we identify a novel role of FoxO1 inhibition in promoting IPC differentiation of hESCs, which may provide clues for induction of mature β cells from hESCs and clinical applications in regenerative medicine.