Misexpression of the double homeodomain protein DUX4 in muscle is believed to cause facioscapulohumeral muscular dystrophy (FSHD). Although strategies are being devised to inhibit DUX4 activity in FSHD, there is little known about the normal function of this protein. Expression of DUX4 has been reported in pluripotent cells and testis. To test the idea that DUX4 may be involved in initiating a germ lineage program in pluripotent cells, we interrogated the effect of expressing the human DUX4 gene at different stages during in vitro differentiation of murine embryonic stem (ES) cells. We find that expression of even low levels of DUX4 is incompatible with pluripotency: DUX4-expressing ES cells downregulate pluripotency markers and rapidly differentiate even in the presence of leukemia inhibitory factor (LIF) and bone morphogenetic protein 4 (BMP4). Transcriptional profiling revealed unexpectedly that DUX4 induced a neurectodermal program. Embryoid bodies exposed to a pulse of DUX4 expression displayed severely inhibited mesodermal differentiation, but acquired neurogenic potential. In a serum-containing medium in which neurogenic differentiation is minimal, DUX4 expression served as a neural-inducing factor, enabling the differentiation of Tuj1+ neurites. These data suggest that besides effects in muscle and germ cells, the involvement of DUX4 in neurogenesis should be considered as anti-DUX4 therapies are developed.