During embryogenesis, various lineages and cell types emerge to form tissues, organs and finally an organism. Cell fate determination is greatly influenced by the local environmental factors, including cell density, environmental pH, extracellular matrix and growth factors. We use human embryonic stem cells (hESCs) to understand the key local factors involved in embryogenesis. We report here that local factors play essential roles in mesodermal cell fate determination. These factors from stem cell niche not only influence mesodermal commitment, but also the subsequent differentiation toward cardiac and endothelial cell fates. These factors regulate both signal transduction and cellular metabolism. Our findings demonstrate the dynamics between stem cells and their niche, and reveal the relevant signaling circuits that are critical for cell fate determination.