The cytokine leukemia inhibitory factor (LIF) drives self-renewal of mouse embryonic stem (ES) cells by activating the transcription factor STAT3. In serum-free cultures, however, LIF is insufficient to block neural differentiation and maintain pluripotency. Here, we report that bone morphogenetic proteins (BMPs) act in combination with LIF to sustain self-renewal and preserve multilineage differentiation, chimera colonization, and germline transmission properties. ES cells can be propagated from single cells and derived de novo without serum or feeders using LIF plus BMP. The critical contribution of BMP is to induce expression of Id genes via the Smad pathway. Forced expression of Id liberates ES cells from BMP or serum dependence and allows self-renewal in LIF alone. Upon LIF withdrawal, Id-expressing ES cells differentiate but do not give rise to neural lineages. We conclude that blockade of lineage-specific transcription factors by Id proteins enables the self-renewal response to LIF/STAT3.