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Bone morphogenetic protein (BMP) signaling plays a crucial role in maintaining the pluripotency of mouse embryonic stem cells (ESCs) and has negative effects on ESC neural differentiation. However, it remains unclear when and how BMP signaling executes those different functions during neural commitment. Here, we show that a BMP4-sensitive window exists during ESC neural differentiation. Cells at this specific period correspond to the egg cylinder stage epiblast and can be maintained as ESC-derived epiblast stem cells (ESD-EpiSCs), which have the same characteristics as EpiSCs derived from mouse embryos. We propose that ESC neural differentiation occurs in two stages: first from ESCs to ESD-EpiSCs and then from ESD-EpiSCs to neural precursor cells (NPCs). We further show that BMP4 inhibits the conversion of ESCs into ESD-EpiSCs during the first stage, and suppresses ESD-EpiSC neural commitment and promotes non-neural lineage differentiation during the second stage. Mechanistic studies show that BMP4 inhibits FGF/ERK activity at the first stage but not at the second stage; and IDs, as important downstream genes of BMP signaling, partially substitute for BMP4 functions at both stages. We conclude that BMP signaling has distinct functions during different stages of ESC neural commitment. [ABSTRACT FROM AUTHOR]