We review key insights into transcriptional regulation of cell state that have emerged from the study of embryonic stem cells. These insights are described in the context of historical studies of the roles of transcription factors, signal transduction pathways, and regulators of chromatin structure. We highlight recent studies that have led to the model that mediator and cohesin physically and functionally connect the enhancers and core promoters of a key subset of active genes in cells, thus generating cell-type-specific DNA loops linked to the gene-expression program of each cell. Mutations in the genes encoding mediator and cohesin components can cause an array of human developmental syndromes and diseases, and we discuss the implications of these findings for the mechanisms involved in these diseases.