Embryonic stem cells and induced pluripotent stem (iPS) cells are characterized by their ability to self-renew and to generate differentiated cells of all three germ layers. This potential makes them an attractive source to address question of developmental and also for use in clinical regenerative medicine. Although the culture conditions to maintain pluripotency and reprogramming technologies have been established, the underlying molecular mechanisms are incompletely understood. Accumulating evidence indicates that the Wnt/β-catenin signaling pathway plays a pivotal role in the maintenance of pluripotency as well as in the process of somatic cell reprogramming. Reciprocally, Wnt/β-catenin signaling also plays a critical role in the lineage decision/commitment process. These dramatically different outcomes upon activation of the Wnt signaling cascade has fueled enormous controversy concerning the role of Wnt signaling in the maintenance of potency and induction of differentiation in stem cells. Here, we discuss and explore the divergent roles of the Wnt signaling pathways based on findings from our lab. Accumulated results from our lab indicate the usage of a critical switching mechanism that regulates the divergent Wnt/catenin transcriptional programs associated with either maintenance of potency or initiation of differentiation.