Functional enhancer annotation is critical for understanding tissue-specific transcriptional regulation and prioritizing disease-associated non-coding variants. However, unbiased enhancer discovery in disease-relevant contexts remains challenging. To identify enhancers pertinent to diabetes, we conducted a CRISPR interference (CRISPRi) screen in the human pluripotent stem cell (hPSC) pancreatic differentiation system. Among the enhancers identified, we focused on an enhancer we named ONECUT1e-664kb, ∼664 kb from the ONECUT1 promoter. Previous studies have linked ONECUT1 coding mutations to pancreatic hypoplasia and neonatal diabetes. We found that homozygous deletion of ONECUT1e-664kb in hPSCs leads to a near-complete loss of ONECUT1 expression and impaired pancreatic differentiation. ONECUT1e-664kb contains a type 2 diabetes-associated variant (rs528350911) disrupting a GATA motif. Introducing the risk variant into hPSCs reduced binding of key pancreatic transcription factors (GATA4, GATA6, and FOXA2), supporting its causal role in diabetes. This work highlights the utility of unbiased enhancer discovery in disease-relevant settings for understanding monogenic and complex disease.