The molecular processes that govern the first cell lineage decisions after fertilization also dictate the developmental potency of stem cells derived from the early mouse embryo. Our understanding of these mechanisms is therefore instrumental for stem cell biology and regenerative medicine. A number of transcription factors are known that determine a cell's fate towards either the embryonic or extraembryonic trophoblast lineages. Recent insights have shown that the definitive fixation of cell lineage fate is achieved by an epigenetic restriction through DNA methylation of the transcription factor Elf5. Lineage crossover can be induced, however, by manipulation of lineage determinants and gatekeepers, or their epigenetic regulation. Here we summarize the accumulating number of experimental conditions where such 'transdifferentiation' is observed that shed light onto the genetic and epigenetic pathways involved in lineage separation and the developmental potential of stem cells.