Multiple transcriptional and epigenetic changes drive differentiation of embryonic stem cells (ESCs). This study unveils an additional level of gene expression regulation involving noncanonical, cap-independent translation of a select group of mRNAs. This is driven by death-associated protein 5 (DAP5/eIF4G2/NAT1), a translation initiation factor mediating IRES-dependent translation. We found that the DAP5 knockdown from human ESCs (hESCs) resulted in persistence of pluripotent gene expression, delayed induction of differentiation-associated genes in different cell lineages, and defective embryoid body formation. The latter involved improper cellular organization, lack of cavitation, and enhanced mislocalized apoptosis. RNA sequencing of polysome-associated mRNAs identified candidates with reduced translation efficiency in DAP5-depleted hESCs. These were enriched in mitochondrial proteins involved in oxidative respiration, a pathway essential for differentiation, the significance of which was confirmed by the aberrant mitochondrial morphology and decreased oxidative respiratory activity in DAP5 knockdown cells. Further analysis identified the chromatin modifier HMGN3 as a cap-independent DAP5 translation target whose knockdown resulted in defective differentiation. Thus, DAP5-mediated translation of a specific set of proteins is critical for the transition from pluripotency to differentiation, highlighting the importance of cap-independent translation in stem cell fate decisions.