Self-renewal and differentiation of pluripotent murine embryonic stem cells (ESCs) is regulated by extrinsic signaling pathways. It is less clear whether cellular metabolism instructs developmental progression. In an unbiased genome-wide CRISPR/Cas9 screen, we identified components of a conserved amino-acid-sensing pathway as critical drivers of ESC differentiation. Functional analysis revealed that lysosome activity, the Ragulator protein complex, and the tumor-suppressor protein Folliculin enable the Rag GTPases C and D to bind and seclude the bHLH transcription factor Tfe3 in the cytoplasm. In contrast, ectopic nuclear Tfe3 represses specific developmental and metabolic transcriptional programs that are associated with peri-implantation development. We show differentiation-specific and non-canonical regulation of Rag GTPase in ESCs and, importantly, identify point mutations in a Tfe3 domain required for cytoplasmic inactivation as potentially causal for a human developmental disorder. Our work reveals an instructive and biomedically relevant role of metabolic signaling in licensing embryonic cell fate transitions.