In mammals, the pre-gastrula proximal epiblast gives rise to primordial germ cells (PGCs) or somatic precursors in response to BMP4 and WNT signaling. Entry into the germline requires activation of a naïve-like pluripotency gene regulatory network (GRN). Recent work has shown that suppression of OTX2 expression in the epiblast by BMP4 allows cells to develop a PGC fate in a precise temporal window. However, the mechanisms by which OTX2 suppresses PGC fate are unknown. Here, we show that, in mice, OTX2 prevents epiblast cells from activating the pluripotency GRN by direct repression of Oct4 and Nanog. Loss of this control during PGC differentiation in vitro causes widespread activation of the pluripotency GRN and a deregulated response to LIF, BMP4 and WNT signaling. These abnormalities, in specific cell culture conditions, result in massive germline entry at the expense of somatic mesoderm differentiation. Increased generation of PGCs also occurs in mutant embryos. We propose that the OTX2-mediated repressive control of Oct4 and Nanog is the basis of the mechanism that determines epiblast contribution to germline and somatic lineage.