Notch signaling plays an essential role in the proliferation, differentiation and cell fate determination of various tissues, including the developing pancreas. One regulator of the Notch pathway is GDE2 (or GDPD5), a transmembrane ecto-phosphodiesterase that cleaves GPI-anchored proteins at the plasma membrane, including a Notch ligand regulator. Here we report that Gde2 knockdown in zebrafish embryos leads to developmental defects, particularly, impaired motility and reduced pancreas differentiation, as shown by decreased expression of insulin and other pancreatic markers. Exogenous expression of human GDE2, but not catalytically dead GDE2, similarly leads to developmental defects. These data reveal functional conservation between zebrafish and human GDE2, and suggest that strict regulation of GDE2 expression and catalytic activity is critical for correct embryonic patterning. In particular, our data uncover a role for GDE2 in regulating pancreas differentiation.