DNA methylation at promoters is an important determinant of gene expression. Earlier studies suggested that the insulin gene promoter is uniquely unmethylated in insulin-expressing pancreatic β-cells, providing a classic example of this paradigm. Here we show that islet cells expressing insulin, glucagon, or somatostatin share a lack of methylation at the promoters of the insulin and glucagon genes. This is achieved by rapid demethylation of the insulin and glucagon gene promoters during differentiation of Neurogenin3⁺ embryonic endocrine progenitors, regardless of the specific endocrine cell-type chosen. Similar methylation dynamics were observed in transgenic mice containing a human insulin promoter fragment, pointing to the responsible cis element. Whole-methylome comparison of human α- and β-cells revealed generality of the findings: genes active in one cell type and silent in the other tend to share demethylated promoters, while methylation differences between α- and β-cells are concentrated in enhancers. These findings suggest an epigenetic basis for the observed plastic identity of islet cell types, and have implications for β-cell reprogramming in diabetes and diagnosis of β-cell death using methylation patterns of circulating DNA.