Ngn3 is recognized as a regulator of pancreatic endocrine formation, and Notch signaling as an important negative regulator Ngn3 gene expression. By conditionally controlling expression of Ngn3 in the pancreas, we find that these two signaling components are dynamically linked. This connection involves transcriptional repression as previously shown, but also incorporates a novel post-translational mechanism. In addition to its ability to promote endocrine fate, we provide evidence of a competing ability of Ngn3 in the patterning of multipotent progenitor cells in turn controlling the formation of ducts. On one hand, Ngn3 cell-intrinsically activates endocrine target genes; on the other, Ngn3 cell-extrinsically promotes lateral signaling via the Dll1>Notch>Hes1 pathway which substantially limits its ability to sustain endocrine formation. Prior to endocrine commitment, the Ngn3-mediated activation of the Notch>Hes1 pathway impacts formation of the trunk domain in the pancreas causing multipotent progenitors to lose acinar, while gaining endocrine and ductal, competence. The subsequent selection of fate from such bipotential progenitors is then governed by lateral inhibition, where Notch>Hes1-mediated Ngn3 protein destabilization serves to limit endocrine differentiation by reducing cellular levels of Ngn3. This system thus allows for rapid dynamic changes between opposing bHLH proteins in cells approaching a terminal differentiation event. Inhibition of Notch signaling leads to Ngn3 protein stabilization in the normal mouse pancreas explants. We conclude that the mutually exclusive expression pattern of Ngn3/Hes1 proteins in the mammalian pancreas is partially controlled through Notch-mediated post-translational regulation and we demonstrate that the formation of insulin-producing beta-cells can be significantly enhanced upon induction of a pro-endocrine drive combined with the inhibition of Notch processing.