During mammalian preimplantation development, the fertilised egg gives rise to a group of pluripotent embryonic cells, the epiblast, and to the extraembryonic lineages that support the development of the foetus during subsequent phases of development. This preimplantation period not only accommodates the first cell fate decisions in a mammal's life but also the transition from a totipotent cell, the zygote, capable of producing any cell type in the animal, to cells with a restricted developmental potential. The cellular and molecular mechanisms governing the balance between developmental potential and lineage specification have intrigued developmental biologists for decades. The preimplantation mouse embryo offers an invaluable system to study cell differentiation as well as the emergence and maintenance of pluripotency in the embryo. Here we review the most recent findings on the mechanisms controlling these early cell fate decisions. The model that emerges from the current evidence indicates that cell differentiation in the preimplantation embryo depends on cellular interaction and intercellular communication. This strategy underlies the plasticity of the early mouse embryo and ensures the correct specification of the first mammalian cell lineages. © 2013 Society for Reproduction and Fertility.