Despite advances in the differentiation of insulin-producing cells from human embryonic stem cells, the generation of mature functional β cells in vitro has remained elusive. To accomplish this goal, we have developed cell culture conditions to closely mimic events occurring during pancreatic islet organogenesis and β cell maturation. In particular, we have focused on recapitulating endocrine cell clustering by isolating and reaggregating immature β-like cells to form islet-sized enriched β-clusters (eBCs). eBCs display physiological properties analogous to primary human β cells, including robust dynamic insulin secretion, increased calcium signalling in response to secretagogues, and improved mitochondrial energization. Notably, endocrine cell clustering induces metabolic maturation by driving mitochondrial oxidative respiration, a process central to stimulus–secretion coupling in mature β cells. eBCs display glucose-stimulated insulin secretion as early as three days after transplantation in mice. In summary, replicating aspects of endocrine cell clustering permits the generation of stem-cell-derived β cells that resemble their endogenous counterparts.