Retinoid signaling has been implicated in embryonic stem cell differentiation. Here we present a systematic analysis of gene expression changes in mouse embryonic stem cells (mESCs), during their spontaneous differentiation into embryoid bodies and the effect of all-trans retinoic acid (ATRA) on this process. We show that retinoic acid is present in the serum and is sufficient to activate retinoid signaling at a basal level in undifferentiated mESCs. This signal disappears during embryoid body formation. However exogenously added ATRA resets the spontaneous differentiation programs in embryoid bodies and initiates a distinct genetic program. These data suggest that retinoid signaling not only promotes a particular pathway but also acts as a context dependent general coordinator of the differentiation states in embryonic stem cells.