Short- and long-scales intra- and inter-chromosomal interactions are linked to gene transcription, but the molecular events underlying these structures and how they affect cell fate decision during embryonic development are poorly understood. One of the first embryonic cell fate decisions (that is, mesendoderm determination) is driven by the POU factor OCT4, acting in concert with the high-mobility group genes Sox-2 and Sox-17. Here we report a chromatin-remodelling mechanism and enhancer function that mediate cell fate switching. OCT4 alters the higher-order chromatin structure at both Sox-2 and Sox-17 loci. OCT4 titrates out cohesin and switches the Sox-17 enhancer from a locked (within an inter-chromosomal Sox-2 enhancer/CCCTC-binding factor CTCF/cohesin loop) to an active (within an intra-chromosomal Sox-17 promoter/enhancer/cohesin loop) state. SALL4 concomitantly mobilizes the polycomb complexes at the Soxs loci. Thus, OCT4/SALL4-driven cohesin- and polycombs-mediated changes in higher-order chromatin structure mediate instruction of early cell fate in embryonic cells.