Oct4 is a mammalian POU transcription factor expressed by early embryo cells and germ cells. We report that the activity of Oct4 is essential for the identity of the pluripotential founder cell population in the mammalian embryo. Oct4-deficient embryos develop to the blastocyst stage, but the inner cell mass cells are not pluripotent. Instead, they are restricted to differentiation along the extraembryonic trophoblast lineage. Furthermore, in the absence of a true inner cell mass, trophoblast proliferation is not maintained in Oct4^−/− embryos. Expansion of trophoblast precursors is restored, however, by an Oct4 target gene product, fibroblast growth factor-4. Therefore, Oct4 also determines paracrine growth factor signaling from stem cells to the trophectoderm.