Canonical Wnt signalling has been implicated in mouse and human embryonic stem cell (ESC) maintenance; however, its requirement is controversial. β-catenin is the key component in this highly conserved Wnt pathway, acting as a transcriptional transactivator. However, β-catenin has additional roles at the plasma membrane regulating cell-cell adhesion, complicating the analyses of cells/tissues lacking β-catenin. We report here the generation of a Ctnnb1 (β-catenin)-deficient mouse ESC (mESC) line and show that self-renewal is maintained in the absence of β-catenin. Cell adhesion is partially rescued by plakoglobin upregulation, but fails to be maintained during differentiation. When differentiated as aggregates, wild-type mESCs form descendants of all three germ layers, whereas mesendodermal germ layer formation and neuronal differentiation are defective in Ctnnb1-deficient mESCs. A Tcf/Lef-signalling-defective β-catenin variant, which re-establishes cadherin-mediated cell adhesion, rescues definitive endoderm and neuroepithelial formation, indicating that the β-catenin cell-adhesion function is more important than its signalling function for these processes.