Embryonic stem (ES) cells are pluripotent cells that can self-renew or differentiate into many cell types. A unique network of transcription factors and signalling molecules are essential for maintaining this capability. Here, we report that a spalt family member, Sall4, is required for the pluripotency of ES cells. Similarly to Oct4, a reduction in Sall4 levels in mouse ES cells results in respecification, under the appropriate culture conditions, of ES cells to the trophoblast lineage. Sall4 regulates transcription of Pou5f1 which encodes Oct4. Sall4 binds to the highly conserved regulatory region of the Pou5f1 distal enhancer and activates Pou5f1 expression in vivo and in vitro. Microinjection of Sall4 small interfering (si) RNA into mouse zygotes resulted in reduction of Sall4 and Oct4 mRNAs in preimplantation embryos and significant expansion of Cdx2 expression into the inner cell mass. These results demonstrate that Sall4 is a transcriptional activator of Pou5f1 and has a critical role in the maintenance of ES cell pluripotency by modulating Oct4 expression. The data also indicates that Sall4 is important for early embryonic cell-fate decisions.