Multipotent stem and progenitor cells have the capacity to generate a limited array of related cell types. The two C. elegans somatic gonadal precursors (SGPs) are multipotent progenitors that generate all 143 cells of the somatic gonad, including complex tissues and specialized signaling cells. To screen for candidate regulators of cell fate and multipotency, we identified transcription factor genes with higher expression in SGPs than in their differentiated sister, the head mesodermal cell. We used RNA interference or genetic mutants to reduce the function of 183 of these genes and examined the worms at two developmental stages. Eight genes were identified that regulate the SGP fate, including the Ci/GLI homolog tra-1, which is the terminal regulator of sex determination. We show that tra-1 regulates SGP fate independently of its role in sex determination, supporting the idea that tra-1 retains ancestral functions. Four genes were necessary for SGPs to generate the correct number and type of descendant cells. We show that the E2F homolog, efl-3, regulates the cell fate decision between distal tip cells and the sheath/spermathecal precursor. We find that the FACT complex gene hmg-4 is required for the generation of the correct number of SGP descendants, and we define an earlier role for the nhr-25 nuclear hormone receptor-encoding gene, in addition to its previously described role in regulating the asymmetric division of SGPs. Overall, our data show that genes regulating cell fate are largely different from genes regulating developmental potential, demonstrating that these processes are genetically separable.