Heparan sulfate (HS) belongs to a class of glycosaminoglycans and is a highly sulfated, linear polysaccharide. HS biosynthesis and modification involves numerous enzymes. HS exists as part of glycoproteins named HS proteoglycans, which are expressed abundantly on the cell surface and in the extracellular matrix. HS interacts with numerous proteins, including growth factors, morphogens, and adhesion molecules, and thereby regulates important developmental processes in invertebrates and vertebrates. Embryonic stem cells (ESCs) are distinguished by their characteristics of self-renewal and pluripotency. Self-renewal allows ESCs to proliferate indefinitely in their undifferentiated state, whereas pluripotency implies their capacity to differentiate into the three germ layers and ultimately all cell types of the adult body. Both traits are tightly regulated by numerous cell signaling pathways. Recent studies have highlighted the importance of HS in the modulation of ESC functions, specifically their lineage fate. Here, we review the current advances that have been made in understanding the structural changes of HS during ESC differentiation and in deciphering the molecular mechanisms by which HS modulates cell fate. Finally, we discuss the applications of heparinoids and chemical inhibitors of HS biosynthesis for the manipulation of ESC culture and directed differentiation.