Epiblast cells in the early post-implantation stage mammalian embryo undergo a transition described as lineage priming before cell fate allocation, but signaling pathways acting upstream remain ill defined. Genetic studies demonstrate that Smad2/3 double-mutant mouse embryos die shortly after implantation. To learn more about the molecular disturbances underlying this abrupt failure, here we characterized Smad2/3-deficient embryonic stem cells (ESCs). We found that Smad2/3 double-knockout ESCs induced to form epiblast-like cells (EpiLCs) display changes in naive and primed pluripotency marker gene expression, associated with the disruption of Oct4-bound distal regulatory elements. In the absence of Smad2/3, we observed enhanced Bmp target gene expression and de-repression of extra-embryonic gene expression. Cell fate allocation into all three embryonic germ layers is disrupted. Collectively, these experiments demonstrate that combinatorial Smad2/3 functional activities are required to maintain distinct embryonic and/or extra-embryonic cell identity during lineage priming in the epiblast before gastrulation.