Anteroposterior (AP) polarity in the mammalian embryo is specified during gastrulation when naive progenitor cells in the primitive ectoderm are recruited into the primitive streak to form mesoderm and endoderm. At the opposite pole, this process is inhibited by signals previously induced in distal visceral endoderm (DVE). Both DVE and primitive streak formation, and hence positioning of the AP axis, rely on the TGFbeta family member Nodal and its proprotein convertases Furin and Pace4. Here, we show that Nodal and Furin are initially co-expressed in the primitive endoderm together with a subset of DVE markers such as Lefty1 and Hex. However, with the appearance of extra-embryonic ectoderm (ExE), DVE formation is transiently inhibited. During this stage, Nodal activity is essential to specify embryonic VE and restrict the expression of Furin to the extra-embryonic region. Activation of Nodal is also necessary to maintain determinants of pluripotency such as Oct4, Nanog and Foxd3 during implantation, and to stimulate elongation of the egg cylinder, before inducing DVE and germ layer formation. We conclude that Nodal is already activated in primitive endoderm, but induces a functional DVE only after promoting the expansion of embryonic VE and pluripotent progenitor cells in the epiblast.