Cell proliferation is fundamental for almost all stages of development and differentiation that require an increase in cell number. Although cell cycle phase has been associated with differentiation, the actual process of proliferation has not been considered as having a specific role. Here we exploit human embryonic stem cell-derived endodermal progenitors that we find are an in vitro model for the ventral foregut. These cells exhibit expansion-dependent increases in differentiation efficiency to pancreatic progenitors that are linked to organ-specific enhancer priming at the level of chromatin accessibility and the decommissioning of lineage-inappropriate enhancers. Our findings suggest that cell proliferation in embryonic development is about more than tissue expansion; it is required to ensure equilibration of gene regulatory networks allowing cells to become primed for future differentiation. Expansion of lineage-specific intermediates may therefore be an important step in achieving high-fidelity in vitro differentiation.