During development, progenitor expansion, lineage allocation, and implementation of differentiation programs need to be tightly coordinated so that different cell types are generated in the correct numbers for appropriate tissue size and function. Pancreatic dysfunction results in some of the most debilitating and fatal diseases, including pancreatic cancer and diabetes. Several transcription factors regulating pancreas lineage specification have been identified, and Notch signalling has been implicated in lineage allocation, but it remains unclear how these processes are coordinated. Using a combination of genetic approaches, organotypic cultures of embryonic pancreata, and genomics, we found that sphingosine-1-phosphate (S1p), signalling through the G protein coupled receptor (GPCR) S1pr2, plays a key role in pancreas development linking lineage allocation and specification. S1pr2 signalling promotes progenitor survival as well as acinar and endocrine specification. S1pr2-mediated stabilisation of the yes-associated protein (YAP) is essential for endocrine specification, thus linking a regulator of progenitor growth with specification. YAP stabilisation and endocrine cell specification rely on Gαi subunits, revealing an unexpected specificity of selected GPCR intracellular signalling components. Finally, we found that S1pr2 signalling posttranscriptionally attenuates Notch signalling levels, thus regulating lineage allocation. Both S1pr2-mediated YAP stabilisation and Notch attenuation are necessary for the specification of the endocrine lineage. These findings identify S1p signalling as a novel key pathway coordinating cell survival, lineage allocation, and specification and linking these processes by regulating YAP levels and Notch signalling. Understanding lineage allocation and specification in the pancreas will shed light in the origins of pancreatic diseases and may suggest novel therapeutic approaches. The pancreas develops from a field of progenitor cells localised in a restricted region of the embryonic endoderm. These progenitor cells proliferate and eventually differentiate to generate the three distinct lineages comprising the endocrine (which include insulin-producing β cells), acinar, and ductal cells. The molecular pathways implicated in the early generation of pancreas progenitors and their proliferation are well understood. It is also known that the Notch signalling pathway is implicated in sequential binary cell fate decisions that generate the three lineages; however, other signals that may regulate this process remain unknown. Here, we show that a phospholipid, sphingosine-1-phosphate (S1p), generated by the progenitor cells themselves, acts as a signal necessary to define the acinar and endocrine lineage. We observe that in the absence of S1p only duct cells are generated and the survival of pancreas progenitors is compromised. The function of this signalling pathway in the generation of the endocrine cells is two-fold. Firstly, it stabilises yes-associated protein (YAP), a transcriptional gene coactivator known to regulate pancreatic progenitor proliferation, and we show that this stability is necessary for the activation of the endocrine specification program. Secondly, it attenuates Notch signalling, allowing the generation of endocrine and acinar cells. Notch attenuation is necessary for the stabilisation of the transcription factor Ngn3, which is required for the generation of endocrine cells. We conclude that S1p acts as an autocrine signal regulating YAP stabilisation and Notch attenuation to mediate pancreas specification. Understanding lineage allocation and specification in the pancreas will shed light on the origins of pancreatic diseases and may suggest novel therapeutic approaches.