Success in the differentiating human embryonic stem cells (hESCs) into insulin-secreting β cells raises new hopes for diabetes treatment. In this work, we demonstrated the feasibility of developing islet organoids from hESCs within biomimetic 3D scaffolds. We showed that such a 3D microenvironment is critical to the generation of pancreatic endoderm and endocrine from hESCs. The organoids formed consisted of pancreatic α, β, δ, and pancreatic polypeptide (PP) cells. A high-level co-expression of PDX1, NKX6.1, and NGN3 in these cells suggests the characteristics of pancreatic β cells. More importantly, most insulin-secreting cells generated did not express glucagon, somatostatin, or PP. The expression of mature β cell marker genes such as Pdx1, Ngn3, Insulin, MafA, and Glut2 was detected in these 3D-induced cell clusters. A high-level expression of C-peptide confirmed the de novo endogenous insulin production in these 3D induced cells. Insulin-secretory granules, an indication of β cell maturity, were detected in these cells as well. Glucose challenging experiments suggested that these cells are sensitive to glucose levels due to their elevated maturity. Exposing the cells to a high concentration of glucose induced a sharp increase in insulin secretion.