The blastocyst (the early mammalian embryo) forms all embryonic and extra-embryonic tissues, including the placenta. It consists of a spherical thin-walled layer, known as the trophectoderm, that surrounds a fluid-filled cavity sheltering the embryonic cells1. From mouse blastocysts, it is possible to derive both trophoblast2 and embryonic stem-cell lines3, which are in vitro analogues of the trophectoderm and embryonic compartments, respectively. Here we report that trophoblast and embryonic stem cells cooperate in vitro to form structures that morphologically and transcriptionally resemble embryonic day 3.5 blastocysts, termed blastoids. Like blastocysts, blastoids form from inductive signals that originate from the inner embryonic cells and drive the development of the outer trophectoderm. The nature and function of these signals have been largely unexplored. Genetically and physically uncoupling the embryonic and trophectoderm compartments, along with single-cell transcriptomics, reveals the extensive inventory of embryonic inductions. We specifically show that the embryonic cells maintain trophoblast proliferation and self-renewal, while fine-tuning trophoblast epithelial morphogenesis in part via a BMP4/Nodal–KLF6 axis. Although blastoids do not support the development of bona fide embryos, we demonstrate that embryonic inductions are crucial to form a trophectoderm state that robustly implants and triggers decidualization in utero. Thus, at this stage, the nascent embryo fuels trophectoderm development and implantation.