The embryonic stem cell (ESC) transition from naive to primed pluripotency is marked by major changes in cellular properties and developmental potential. ISY1 regulates microRNA (miRNA) biogenesis, yet its role and relevance to ESC biology remain unknown. Here, we find that highly dynamic ISY1 expression during the naive-to-primed ESC transition defines a specific phase of "poised" pluripotency characterized by distinct miRNA and mRNA transcriptomes and widespread poised cell contribution to mouse chimeras. Loss- and gain-of-function experiments reveal that ISY1 promotes exit from the naive state and is necessary and sufficient to induce and maintain poised pluripotency, and that persistent ISY1 overexpression inhibits the transition from the naive to the primed state. We identify a large subset of ISY1-dependent miRNAs that can rescue the inability of miRNA-deficient ESCs to establish the poised state and transition to the primed state. Thus, dynamic ISY1 regulates poised pluripotency through miRNAs to control ESC fate.