During early development, the mammalian embryo undergoes a series of profound changes that lead to the formation of two extraembryonic tissues--the trophectoderm and the primitive endoderm. These tissues encapsulate the pluripotent epiblast at the time of implantation. The current model proposes that the formation of these lineages results from two consecutive binary cell fate decisions. The first controls the formation of the trophectoderm and the inner cell mass, and the second controls the formation of the primitive endoderm and the epiblast within the inner cell mass. While early mammalian embryos develop with extensive plasticity, the embryonic pattern prior to implantation is remarkably reproducible. Here, we review the molecular mechanisms driving the cell fate decision between primitive endoderm and epiblast in the mouse embryo and integrate data from recent studies into the current model of the molecular network regulating the segregation between these lineages and their subsequent differentiation.