Intracellular transcriptional regulators and extracellular signaling pathways together regulate the allocation of cell fates during development, but how their molecular activities are integrated to establish the correct proportions of cells with particular fates is not known. Here we study this question in the context of the decision between the epiblast (Epi) and the primitive endoderm (PrE) fate that occurs in the mammalian preimplantation embryo. Using an embryonic stem (ES) cell model, we discover two successive functions of FGF/MAPK signaling in this decision. First, the pathway needs to be inhibited to make the PrE-like gene expression program accessible for activation by GATA transcription factors in ES cells. In a second step, MAPK signaling levels determine the threshold concentration of GATA factors required for PrE-like differentiation, and thereby control the proportion of cells differentiating along this lineage. Our findings can be explained by a simple mutual repression circuit modulated by FGF/MAPK signaling. This may be a general network architecture to integrate the activity of signal transduction pathways and transcriptional regulators, and serve to balance proportions of cell fates in several contexts.