Recent evidence from embryonic stem cells suggests that the aryl hydrocarbon receptor (AHR) plays a central role in the regulation of pluripotency, a short-lived property of cells in the early blastula inner cell mass (ICM). Four key observations support this conclusion. The first is the temporal association between upregulation of AHR expression and the onset of cell differentiation, which argues for the AHR as a determinant of cell fate decisions. The second is the repression of the pluripotency factors OCT4 and NANOG by the AHR, which depresses their function and contributes to the cell's exit from pluripotency. The third is the temporal association between changes in global DNA methylation and stage-dependent AHR expression, which parallel each other during embryonic development, suggesting that AHR helps configure a repressive chromatin structure that controls differentiation. The fourth is the incidence of early developmental aberrations that take place in Ahr-null mice and cause the disruption of their embryonic program, which is likely to be a consequence of the loss of pluripotency of the Ahr-/- ICM cells. In this short review, we will focus on the modulation of pluripotency as a novel function of the AHR, and on the potentially detrimental developmental outcomes that may result from exposure to environmental toxicants. This line of enquiry brings us to the tantalizing conclusion that by activating mechanisms that modulate pluripotency, AHR regulates embryonic development. The likelihood that exposure to environmental AHR ligands might disrupt developmental processes is a reasonable corollary to this conclusion.