Understanding the regulatory network of cell fate acquisition remains a major challenge. Using the induction of surface epithelium (SE) from human embryonic stem cells as a paradigm, we show that the dynamic changes in morphology-related genes (MRGs) closely correspond to SE fate transitions. The marked remodeling of cytoskeleton indicates the initiation of SE differentiation. By integrating promoter interactions, epigenomic features, and transcriptome, we delineate an SE-specific cis-regulatory network and identify grainyhead-like 3 (GRHL3) as an initiation factor sufficient to drive SE commitment. Mechanically, GRHL3 primes the SE chromatin accessibility landscape and activates SE-initiating gene expression. In addition, the evaluation of GRHL3-mediated promoter interactions unveils a positive feedback loop of GRHL3 and bone morphogenetic protein 4 on SE fate decisions. Our work proposes a concept that MRGs could be used to identify cell fate transitions and provides insights into regulatory principles of SE lineage development and stem cell-based regenerative medicine.