Embryonic stem cells (ESCs) are capable of indefinite self-renewal while retaining the ability to differentiate to any of the three germ layers that give rise to all somatic cell types. An emerging view is that a core set of transcription factors, including Oct4, Sox2, and Nanog, form a robust autoregulatory circuit that maintains ESCs in a self-renewing state. To accommodate the capacity of such cells to undergo germ layer-specific differentiation, we predicted a posttranslational mechanism that could negatively regulate these core self-renewal factors. Here we report caspase-induced cleavage of Nanog in differentiating ESCs. Stem cells lacking the Casp3 gene showed marked defects in differentiation, while forced expression of a caspase cleavage-resistant Nanog mutant in ESCs strongly promoted self-renewal. These results link a major component of the programmed cell-death pathway to the regulation of ESC development.