X chromosome inactivation (XCI) is the dosage compensation mechanism that evolved in female mammals to correct the genetic imbalance of X-linked genes between sexes. X chromosome inactivation occurs in early development when one of the two X chromosomes of females is nearly-completely silenced. Differentiating Embryonic Stem cells (ESC) are regarded as a useful tool to study XCI, since they recapitulate many events occurring during early development. In this review we aim to summarise the advances in the field and to discuss the close connection between cell differentiation and X chromosome inactivation, with a particular focus on mouse ESCs.