The development of multicellular organisms occurs through a series of cell state transitions controlled by gene regulatory networks. Central to these networks are transcription factors (TFs) which bind enhancers and activate the expression of other genes, some of which are also TFs. Gene regulatory networks (GRN) connect TFs and enhancers in a nonlinear circuit capable of producing complex behavior such as bifurcations between stable cell states. Our dynamic network modelling of the Embryonic Stem Cell (ESC) to Definitive Endoderm (DE) transition requires an as yet unknown negative feedback mechanism for stability. Here, we show that cell state specific microRNAs (miRNAs) can provide this negative feedback by inactivating other cell lineage determining TFs (ESC or DE) during the transition. Our model provides a mechanism to maintain stable cell states without requiring a large set of cell-type-specific repressive TFs, of which there are fewer known examples than activators. In support of this model, we use computational models and analyze gene and miRNA expression and chromatin accessibility data from human cell lines to detect enhancers activating the miRNAs consistent with our network model. Our analysis highlights the interplay between TFs and miRNAs during ESC to DE transition and proposes a novel model for gene regulation.