The emergence of pluripotent epiblast (EPI) and primitive endoderm (PrE) lineages within the inner cell mass (ICM) of the mouse blastocyst involves initial co-expression of lineage-associated markers followed by mutual exclusion and salt-and-pepper distribution of lineage-biased cells. Precisely how EPI and PrE cell fate commitment occurs is not entirely clear; however, previous studies in mice have implicated FGF/ERK signaling in this process. Here, we investigated the phenotype resulting from zygotic and maternal/zygotic inactivation of Fgf4. Fgf4 heterozygous blastocysts exhibited increased numbers of NANOG-positive EPI cells and reduced numbers of GATA6-positive PrE cells, suggesting that FGF signaling is tightly regulated to ensure specification of the appropriate numbers of cells for each lineage. Although the size of the ICM was unaffected in Fgf4 null mutant embryos, it entirely lacked a PrE layer and exclusively comprised NANOG-expressing cells at the time of implantation. An initial period of widespread EPI and PrE marker co-expression was however established even in the absence of FGF4. Thus, Fgf4 mutant embryos initiated the PrE program but exhibited defects in its restriction phase, when lineage bias is acquired. Consistent with this, XEN cells could be derived from Fgf4 mutant embryos in which PrE had been restored and these cells appeared indistinguishable from wild-type cells. Sustained exogenous FGF failed to rescue the mutant phenotype. Instead, depending on concentration, we noted no effect or conversion of all ICM cells to GATA6-positive PrE. We propose that heterogeneities in the availability of FGF produce the salt-and-pepper distribution of lineage-biased cells.