The mechanisms underlying disparate roles of the canonical Wnt signaling pathway in maintaining self‐renewal or inducing differentiation and lineage specification in embryonic stem cells (ESCs) are not clear. In this study, we provide the first demonstration that self‐renewal versus differentiation of human ESCs (hESCs) in response to Wnt signaling is predominantly determined by a two‐layer regulatory circuit involving β‐catenin, E‐cadherin, PI3K/Akt, and Slug in a time‐dependent manner. Short‐term upregulation of β‐catenin does not lead to the activation of T‐cell factor (TCF)‐eGFP Wnt reporter in hESCs. Instead, it enhances E‐cadherin expression on the cell membrane, thereby enhancing hESC self‐renewal through E‐cadherin‐associated PI3K/Akt signaling. Conversely, long‐term Wnt activation or loss of E‐cadherin intracellular β‐catenin binding domain induces TCF‐eGFP activity and promotes hESC differentiation through β‐catenin‐induced upregulation of Slug. Enhanced expression of Slug leads to a further reduction of E‐cadherin that serves as a β‐catenin “sink” sequestering free cytoplasmic β‐catenin. The formation of such a framework reinforces hESCs to switch from a state of temporal self‐renewal associated with short‐term Wnt/β‐catenin activation to definitive differentiation. Stem Cells 2015;33:1419–1433