Normal mitochondrial function is essential for human induced pluripotent stem (hiPS) cell differentiation into definitive endoderm (DE). However, the underlying mechanisms that maintain mitochondrial homeostasis during DE differentiation are not fully elucidated. Here we report that glyoxalase 1 (GLO1) is a novel regulator of DE differentiation and subsequent alveolar development in hiPS cells via maintaining mitochondrial homeostasis. To determine the role of GLO1 in these processes, we first established GLO1-knockout hiPS cells using CRISPR-Cas9-mediated genome deletion and demonstrated that GLO1 deficiency significantly reduced the differentiation efficiency of DE, leading to defects in alveolar epithelial cell differentiation and alveolar organoid development. Moreover, GLO1 deficiency interfered with mitochondrial biogenesis and respiration during the early DE stage. Defects in DE differentiation due to dysfunctional mitochondria were effectively rescued by high-dose treatment with CHIR99021, a glycogen synthase kinase 3 inhibitor. Our study uncovered an essential role of GLO1 as a key regulator of mitochondrial homeostasis for early lineage specification of hiPS cells, moving away from its conventional role as a primary enzyme in methylglyoxal detoxification.