The clinical importance of anterior foregut endoderm (AFE) derivatives, such as thyrocytes, has led to intense research efforts for their derivation through directed differentiation of pluripotent stem cells (PSCs). Here, we identify transient overexpression of the transcription factor (TF) NKX2-1 as a powerful inductive signal for the robust derivation of thyrocyte-like cells from mouse PSC-derived AFE. This effect is highly developmental stage specific and dependent on FOXA2 expression levels and precise modulation of BMP and FGF signaling. The majority of the resulting cells express thyroid TFs (Nkx2-1, Pax8, Foxe1, Hhex) and thyroid hormone synthesis-related genes (Tg, Tpo, Nis, Iyd) at levels similar to adult mouse thyroid and give rise to functional follicle-like epithelial structures in Matrigel culture. Our findings demonstrate that NKX2-1 overexpression converts AFE to thyroid epithelium in a developmental time-sensitive manner and suggest a general methodology for manipulation of cell-fate decisions of developmental intermediates.