Embryonic stem (ES) cells differentiate spontaneously toward a neuroectodermal fate in serum-free, adherent monocultures. Here, we show that this spontaneous neural fate requires retinoic acid (RA) synthesis. We monitor ES cells containing reporter genes for markers of the early neural plate as well as the primitive streak and its progeny to determine the cell fates induced when RA signaling is perturbed. We demonstrate that the spontaneous neural commitment of mouse ES cells requires endogenous RA production from vitamin A (vitA) in the medium. Formation of neural progenitors is inhibited by removing vitA from the medium, by inhibiting the enzymes that catalyze the synthesis of RA, or by inhibiting RA receptors. We show that subnanomolar concentrations of RA restore neuroectodermal differentiation when RA synthesis is blocked. We demonstrate that a neural to mesodermal fate change occurring when RA signaling is inhibited is dependent on Nodal-, Wnt-, and fibroblast growth factor-signaling. We show that Nodal suppresses neural development in a Wnt-dependent manner and that Wnt-mediated inhibition of neural development is reversed by inhibition of Nodal signaling. Together, our results show that neural induction in ES cells requires RA at subnanomolar levels to suppress Nodal signaling and suggest that the mechanism by which Wnt signaling suppresses neural development is through facilitation of Nodal signaling.