During mammalian development, the challenge for the embryo is to override intrinsic cellular plasticity to drive cells to distinct fates. Here, we unveil novel roles for the HIPPO signaling pathway in controlling cell positioning and expression of Sox2, the first marker of pluripotency in the mouse early embryo. We show that maternal and zygotic YAP1 and WWTR1 repress Sox2 while promoting expression of the trophectoderm gene Cdx2 in parallel. Yet, Sox2 is more sensitive than Cdx2 to Yap1/Wwtr1 dosage, leading cells to a state of conflicted cell fate when YAP1/WWTR1 activity is moderate. Remarkably, HIPPO signaling activity resolves conflicted cell fate by repositioning cells to the interior of the embryo, independent of its role in regulating Sox2 expression. Rather, HIPPO antagonizes apical localization of Par complex components PARD6B and aPKC. Thus, negative feedback between HIPPO and Par complex components ensure robust lineage segregation., eLife digest As an embryo develops, its cells divide, grow and migrate in specific patterns to build an organized collection of cells that go on to form our tissues and organs. One of the first steps – well before the embryo has implanted into the womb – is to allocate cells to make part of the placenta. Once this process is complete, the remaining cells continue building the organism. These cells are pluripotent, meaning they can develop into any part of the body. Scientists think that the embryo manages to sort ‘placenta cells’ from pluripotent ones with the help of certain proteins, which the mother has packaged into her eggs. To investigate this further, Frum et al. used genetic tools to track a specific gene called Sox2 that identifies pluripotent cells as soon as they are formed in mouse embryos. The experiments revealed that the mother places two closely related proteins known as YAP1 and WWTR1 within each egg, which help to make placenta cells different from pluripotent cells. Moreover, both proteins enable the embryo to segregate these two cell types to two different locations: placenta cells are moved to the outer layer of the embryo, while pluripotent cells are moved to the inside. Current technologies allow researchers to create pluripotent cells in the laboratory. But these approaches often result in error, failing to replicate the embryo’s natural ability. By studying how embryos form and arrange pluripotent cells, scientists hope to advance stem cell technology (which emerge from pluripotent cells). This may help to find new ways to heal damaged tissues and organs, or to treat or even prevent many diseases.