The pluripotent status of embryonic stem cells (ESCs) confers upon them the capacity to differentiate into the three primary germ layers, ectoderm, mesoderm and endoderm, from which all the cells of the adult body are derived. An understanding of the mechanisms controlling pluripotency is thus essential for driving the differentiation of human pluripotent cells into cell types useful for clinical applications. The Activin/Nodal signalling pathway is necessary to maintain pluripotency in human ESCs and in mouse epiblast stem cells (EpiSCs), but the molecular mechanisms by which it achieves this effect remain obscure. Here, we demonstrate that Activin/Nodal signalling controls expression of the key pluripotency factor Nanog in human ESCs and in mouse EpiSCs. Nanog in turn prevents neuroectoderm differentiation induced by FGF signalling and limits the transcriptional activity of the Smad2/3 cascade, blocking progression along the endoderm lineage. This negative-feedback loop imposes stasis in neuroectoderm and mesendoderm differentiation, thereby maintaining the pluripotent status of human ESCs and mouse EpiSCs.