The cell fate decision of multi-potent pancreatic progenitor cells between the exocrine and endocrine lineages is regulated by Notch signalling, mediated by cell–cell interactions. However, canonical models of Notch-mediated lateral inhibition cannot explain the scattered spatial distribution of endocrine cells and the cell-type ratio in the developing pancreas. Based on evidence from acinar-to-islet cell transdifferentiation in vitro, we propose that lateral stabilization, i.e. positive feedback between adjacent progenitor cells, acts in parallel with lateral inhibition to regulate pattern formation in the pancreas. A simple mathematical model of transcriptional regulation and cell–cell interaction reveals the existence of multi-stability of spatial patterns whose simultaneous occurrence causes scattering of endocrine cells in the presence of noise. The scattering pattern allows for control of the endocrine-to-exocrine cell-type ratio by modulation of lateral stabilization strength. These theoretical results suggest a previously unrecognized role for lateral stabilization in lineage specification, spatial patterning and cell-type ratio control in organ development.