Abstract Increasing evidence supports that modifications in the mitochondrial content, oxidative phosphorylation (OXPHOS) activity, and cell metabolism influence the fate of stem cells. However, the regulators involved in the crosstalk between mitochondria and stem cell fate remains poorly characterized. Here, we identified a transcriptional regulatory axis, composed of transcription factor 7-like 2 (TCF7L2) (a downstream effector of the Wnt/β-catenin pathway, repressed during differentiation) and peroxisome proliferator-activated receptor gamma coactivator-1 alpha (PGC-1α) (the master regulator of mitochondrial biogenesis, induced during differentiation), coupling the loss of pluripotency and early commitment to differentiation, to the initiation of mitochondrial biogenesis and metabolic shift toward OXPHOS. PGC-1α induction during differentiation is required for both mitochondrial biogenesis and commitment to the hepatocytic lineage, and TCF7L2 repression is sufficient to increase PGC-1α expression, mitochondrial biogenesis and OXPHOS activity. We further demonstrate that OXPHOS activity is required for the differentiation toward the hepatocytic lineage, thus providing evidence that bi-directional interactions control stem cell differentiation and mitochondrial abundance and activity.