Cell fate decisions are fundamental to the development of multicellular organisms. In mammals the first cell fate decision involves segregation of the pluripotent inner cell mass and the trophectoderm, a process regulated by cell polarity proteins, HIPPO signaling and lineage-specific transcription factors such as CDX2. However, the regulatory mechanisms that operate upstream to specify the trophectoderm lineage have not been established. Here we report that transcription factor AP-2γ (TFAP2C) functions as a novel upstream regulator of Cdx2 expression and position-dependent HIPPO signaling in mice. Loss- and gain-of-function studies and promoter analysis revealed that TFAP2C binding to an intronic enhancer is required for activation of Cdx2 expression during early development. During the 8-cell to morula transition TFAP2C potentiates cell polarity to suppress HIPPO signaling in the outside blastomeres. TFAP2C depletion triggered downregulation of PARD6B, loss of apical cell polarity, disorganization of F-actin, and activation of HIPPO signaling in the outside blastomeres. Rescue experiments using Pard6b mRNA restored cell polarity but only partially corrected position-dependent HIPPO signaling, suggesting that TFAP2C negatively regulates HIPPO signaling via multiple pathways. Several genes involved in regulation of the actin cytoskeleton (including Rock1, Rock2) were downregulated in TFAP2C-depleted embryos. Inhibition of ROCK1 and ROCK2 activity during the 8-cell to morula transition phenocopied TFAP2C knockdown, triggering a loss of position-dependent HIPPO signaling and decrease in Cdx2 expression. Altogether, these results demonstrate that TFAP2C facilitates trophectoderm lineage specification by functioning as a key regulator of Cdx2 transcription, cell polarity and position-dependent HIPPO signaling.

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