A switch from E- to N-cadherin regulates the transition from pluripotency to neural identity, but the mechanism by which cadherins regulate differentiation was previously unknown. Here we show that the acquisition of N-cadherin stabilises neural identity by dampening anti-neural signals. We use quantitative image-analysis to identify an effect of N-cadherin to promote neural differentiation independently of effects on cell cohesiveness. We reveal that cadherin switching diminishes the level of nuclear β-catenin, and that N-cadherin also dampens FGF activity and consequently stabilises neural fate. Finally, we compare the timing of cadherin switching and differentiation in vivo and in vitro, and find that this process becomes dysregulated during in vitro differentiation. We propose that N-cadherin helps to propagate a stable neural identity throughout the emerging neuroepithelium, and that dysregulation of this process contributes to asynchronous differentiation in culture.