Animals use diverse strategies to specify tissue lineages during development. A common strategy is to partition maternally supplied and localized lineage determinants into progenitor cells. The mouse embryo appears to use a different, more regulative strategy to specify the first three lineages: the epiblast (EPI: future embryo), the trophectoderm (TE: future placenta), and the primitive endoderm (PE: future yolk sac). These lineages are specified during two successive differentiation steps leading to formation of the blastocyst. Here, we review classic and contemporary models of early lineage specification in the mouse, and describe recent efforts to understand the molecular regulation of these events. We describe evidence that trophectoderm differentiation bears resemblance to the process of epithelialization and describe the importance of apical/basal protein complexes in regulating this process. Next, we present a revised model of PE specification, and describe evidence that PE cells in the inner cell mass sort out to occupy their ultimate position on the surface of the EPI. Finally, we describe factors that reinforce these lineages and three distinct stem cell types that can be isolated from them. Together, these mechanisms guide the differentiation of the first lineages of the mouse and thereby set up tissues that will be important for the first steps of embryonic body patterning. Developmental Dynamics 235:2301-2314, 2006.