Recent advances in human pluripotent stem cell (hPSC) differentiation protocols have generated insulin-producing cells resembling pancreatic β cells. While these stem cell-derived β (SC-β) cells are capable of undergoing glucose-stimulated insulin secretion (GSIS), insulin secretion per cell remains low compared with islets and cells lack dynamic insulin release. Herein, we report a differentiation strategy focused on modulating transforming growth factor β (TGF-β) signaling, controlling cellular cluster size, and using an enriched serum-free media to generate SC-β cells that express β cell markers and undergo GSIS with first- and second-phase dynamic insulin secretion. Transplantation of these cells into mice greatly improves glucose tolerance. These results reveal that specific time frames for inhibiting and permitting TGF-β signaling are required during SC-β cell differentiation to achieve dynamic function. The capacity of these cells to undergo GSIS with dynamic insulin release makes them a promising cell source for diabetes cellular therapy.