To understand cell cycle control mechanisms in early development and how they change during differentiation, we used embryonic stem cells to model embryonic events. Our results demonstrate that as pluripotent cells differentiate, the length of G1 phase increases substantially. At the molecular level, this is associated with a significant change in the size of active cyclin-dependent kinase (Cdk) complexes, the establishment of cell cycle-regulated Cdk2 activity and the activation of a functional Rb-E2F pathway. The switch from constitutive to cell cycle-dependent Cdk2 activity coincides with temporal changes in cyclin A2 and E1 protein levels during the cell cycle. Transcriptional mechanisms underpin the down-regulation of cyclin levels and the establishment of their periodicity during differentiation. As pluripotent cells differentiate and pRb/p107 kinase activities become cell cycle dependent, the E2F-pRb pathway is activated and imposes cell cycle-regulated transcriptional control on E2F target genes, such as cyclin E1. These results suggest the existence of a feedback loop where Cdk2 controls its own activity through regulation of cyclin E1 transcription. Changes in rates of cell division, cell cycle structure and the establishment of cell cycle-regulated Cdk2 activity can therefore be explained by activation of the E2F-pRb pathway.