Human embryonic stem cells (hESCs) self-renew indefinitely and give rise to derivatives of all three primary germ layers, yet little is known about the signaling cascades that govern their pluripotent character. Because it plays a prominent role in the early cell fate decisions of embryonic development, we have examined the role of TGFbeta superfamily signaling in hESCs. We found that, in undifferentiated cells, the TGFbeta/activin/nodal branch is activated (through the signal transducer SMAD2/3) while the BMP/GDF branch (SMAD1/5) is only active in isolated mitotic cells. Upon early differentiation, SMAD2/3 signaling is decreased while SMAD1/5 signaling is activated. We next tested the functional role of TGFbeta/activin/nodal signaling in hESCs and found that it is required for the maintenance of markers of the undifferentiated state. We extend these findings to show that SMAD2/3 activation is required downstream of WNT signaling, which we have previously shown to be sufficient to maintain the undifferentiated state of hESCs. Strikingly, we show that in ex vivo mouse blastocyst cultures, SMAD2/3 signaling is also required to maintain the inner cell mass (from which stem cells are derived). These data reveal a crucial role for TGFbeta signaling in the earliest stages of cell fate determination and demonstrate an interconnection between TGFbeta and WNT signaling in these contexts.