Pancreatic β-cells arise from Ngn3(+) endocrine progenitors within the trunk epithelium of the embryonic pancreas. The emergence of endocrine cells requires E-cadherin downregulation, but the crucial steps that elicit such are not clear, yet probably important for ultimately being able to efficiently generate β-cells de novo from stem cells. Grg3 (groucho-related gene 3, also known as Tle3), encodes a member of the Groucho/TLE family of co-repressors and its function in various cell contexts is mediated by recruitment to target genes by different transcription factors. Grg proteins broadly regulate the progression of progenitor cells to differentiated cell types, but specific developmental mechanisms have not been clear. We find that Grg3 is expressed in most β-cells and a subset of other endocrine cell types in the pancreas. Grg3 is highly expressed in Ngn3(+) endocrine progenitor descendants just after transient Ngn3 expression. Grg3-null embryos die at E14.5, which is associated with placental defects, so we explanted E12.5 pancreata to allow endocrine differentiation to occur in culture. Grg3 knockout explants displayed a drastic decrease in the differentiation of all endocrine cell types owing to defects in the delamination of early endocrine progenitors from the trunk epithelium. We find that Grg3 normally suppresses E-cadherin gene expression, thereby allowing delamination of endocrine cells from the trunk epithelium and revealing how this transcriptional co-repressor modulates this crucial step of β-cell development.