High‐mobility‐group protein 2 (HMGB2) expression is up‐regulated in human liver cancer; however, little is known about its regulatory function. Here, we establish HMGB2 as a new modulator of the pluripotency of mouse embryonic stem cells. Similar to octamer‐binding transcription factor 4 (OCT4) and sex‐determining region Y‐box 2 (SOX2), HMGB2 protein is highly expressed in undifferentiated CGR8 cells, whereas it undergoes rapid decline during embryonic body formation. HMGB2 interacts with OCT4, increases protein expression of OCT4 and SOX2, and enhances their transcriptional activities. We also show that microRNA (miRNA)‐127 is a translational repressor of HMGB2 protein expression by targeting its 3′ untranslated region. We further elucidate a transcriptional mechanism controlling HMGB2 messenger RNA expression by the nuclear receptor small heterodimer partner (SHP) and transcription factor E2F1. Diminishing HMGB2 expression by ectopic expression of miR‐127 or SHP or treatment with the small molecule inhibitor inflachromene decreases OCT4 and SOX2 expression and facilitates CGR8 differentiation. In addition, HMGB2 is markedly induced in liver tumor initiating cells. Diminishing HMGB2 expression by short hairpin RNA for HMGB2 (shHMGB2), miR‐127, or SHP impairs spheroid formation. Importantly, HMGB2 expression is elevated in various human cancers. Conclusion: HMGB2 acts upstream of OCT4/SOX2 signaling to control embryonic stem cell pluripotency. Diminishing HMGB2 expression by miR‐127 or SHP may provide a potential means to decrease the pluripotency of tumor initiating cells. (Hepatology Communications 2017;1:816–830)