Attenuated inflammatory response is a property of embryonic stem cells (ESCs). However, the underlying mechanisms are unclear. Moreover, whether the attenuated inflammatory status is involved in ESC differentiation is also unknown. Here, we found that autophagy-related protein ATG5 is essential for both attenuated inflammatory response and differentiation of mouse ESCs and that attenuation of inflammatory signaling is required for mouse ESC differentiation. Mechanistically, ATG5 recruits FBXW7 to promote ubiquitination and proteasome-mediated degradation of β-TrCP1, resulting in the inhibition of nuclear factor κB (NF-κB) signaling and inflammatory response. Moreover, differentiation defects observed in ATG5-depleted mouse ESCs are due to β-TrCP1 accumulation and hyperactivation of NF-κB signaling, as loss of β-TrCP1 and inhibition of NF-κB signaling rescued the differentiation defects. Therefore, this study reveals a previously uncharacterized mechanism maintaining the attenuated inflammatory response in mouse ESCs and further expands the understanding of the biological roles of ATG5.