Mammalian embryos change shape dramatically upon implantation. The cellular and molecular mechanism underlying this transition are largely unknown. Here, we show that this transition is directed by cross talk between the embryonic epiblast and the first extra-embryonic tissue, the trophectoderm. Specifically, we show via visualisation of a Cdx2-GFP reporter line and pharmacologically mediated loss and gain of function experiments that the epiblast provides FGF signal that results in differential fate acquisition in the multipotent trophectoderm leading to the formation of a tissue boundary within this tissue. The trophectoderm boundary becomes essential for expansion of the tissue into a multi-layered epithelium. Folding of this multi-layered trophectoderm induces spreading of the second extra-embryonic tissue, the primitive endoderm. Together, these events remodel the pre-implantation embryo into its post-implantation cylindrical shape. Our findings uncover how communication between embryonic and extra-embryonic tissues provides positional cues to drive shape changes in mammalian development during implantation.