Existing knowledge of the role of epigenetic modifiers in pancreas development has exponentially increased. However, the function of TET dioxygenases in pancreatic endocrine specification remains obscure. We set out to tackle this issue using a human embryonic stem cell (hESC) differentiation system, in which TET1/TET2/TET3 triple knockout cells display severe defects in pancreatic β-cell specification. The integrative whole-genome analysis identifies unique cell-type-specific hypermethylated regions (hyper-DMRs) displaying reduced chromatin activity and remarkable enrichment of FOXA2, a pioneer transcription factor essential for pancreatic endoderm specification. Intriguingly, TET depletion leads to significant changes in FOXA2 binding at the pancreatic progenitor stage, in which gene loci with decreased FOXA2 binding feature low levels of active chromatin modifications and enriches for bHLH motifs. Transduction of full-length TET1 but not the TET1-catalytic-domain in TET-deficient cells effectively rescues β-cell differentiation accompanied by restoring PAX4 hypomethylation. Taking these findings together with the defective generation of functional β-cells upon TET1-inactivation, our study unveils an essential role of TET1-dependent demethylation in establishing β-cell identity. Moreover, we discover a physical interaction between TET1 and FOXA2 in endodermal lineage intermediates, which provides a mechanistic clue regarding the complex crosstalk between TET dioxygenases and pioneer transcription factors in epigenetic regulation during pancreas specification.