During preimplantation mouse development, embryos establish two distinct cell lineages by the time of blastocyst formation: trophectoderm (TE) and inner cell mass (ICM). To explain the mechanism of this cell fate specification, two classical models, namely the inside–outside model and polarity model have been proposed based on experimental manipulation studies on embryos. This review summarizes recent findings on the molecular mechanisms of fate specification, and discusses how these findings fit into the classical models. TE development is regulated by a transcription factor cascade, the core transcription factors of which are Tead4 and Cdx2. The transcriptional activity of Tead4 is regulated by the position-dependent Hippo signaling pathway, thus supporting the inside–outside model. In contrast, several findings support the polarity model; some other findings suggest different mechanisms. We also discuss how the two classical models could be further developed in the light of recent molecular findings.