Stomata consist of a pair of guard cells that mediate gas and water-vapour exchange between plants and the atmosphere. Stomatal precursor cells-meristemoids-possess a transient stem-cell-like property and undergo several rounds of asymmetric divisions before further differentiation. Here we report that the Arabidopsis thaliana basic helix-loop-helix (bHLH) protein MUTE is a key switch for meristemoid fate transition. In the absence of MUTE, meristemoids abort after excessive asymmetric divisions and fail to differentiate stomata. Constitutive overexpression of MUTE directs the entire epidermis to adopt guard cell identity. MUTE has two paralogues: FAMA, a regulator of guard cell morphogenesis, and SPEECHLESS (SPCH). We show that SPCH directs the first asymmetric division that initiates stomatal lineage. Together, SPCH, MUTE and FAMA bHLH proteins control stomatal development at three consecutive steps: initiation, meristemoid differentiation and guard cell morphogenesis. Our findings highlight the roles of closely related bHLHs in cell type differentiation in plants and animals.