Development of the mouse embryo to the blastocyst stage occurs over 3 to 4 days following fertilization of the oocyte. During this time, several molecular and morphological events take place that result in the formation of three distinct cell lineages: the trophectoderm, the epiblast, and the primitive endoderm. Many studies have investigated the processes that control lineage specification in the blastocyst including gene expression, cell signaling, cell-cell contact/positional relationships, and most recently, epigenetics. Here we review, at the molecular level, recent contributions to our understanding of the mechanisms that play a role in formation of these lineages. Additionally, we focus on the next steps in differentiation to highlight processes important in the development of those lineages that contribute to the extraembryonic tissues. In this context, we discuss the establishment of extraembryonic ectoderm and the contributions of parietal and visceral endoderm to yolk sac formation.