MicroRNAs (miRNAs) regulate myriad biological processes; however, their role in cell fate choice is relatively unexplored. Pluripotent NT2/D1 embryonal carcinoma cells differentiate into an epithelial/smooth muscle phenotype when treated with bone morphogenetic protein-2 (BMP-2). To identify miRNAs involved in epithelial cell development, we performed miRNA profiling of NT2/D1 cells treated with BMP-2 at 6, 12, and 24 h, and on days 6 and 10. Integration of the miRNA profiling data with previously obtained gene expression profiling (GEP) data of NT2/D1 cells treated with BMP-2 at the same time points identified miR-18b and miR-518b as the top two miRNAs with the highest number of up-regulated predicted targets with known functions in epithelial lineage development. Silencing of miR-18b and miR-518b in NT2/D1 cells revealed several up-regulated TFs with functions in epithelial lineage development; among these, target prediction programs identified FOXN1 as the only direct target of both miRNAs. FOXN1 has previously been shown to play an important role in keratinocyte differentiation and epithelial cell proliferation. NT2/D1 and H9 human embryonic stem cells with silenced miR-18b and miR-518b showed up-regulation of FOXN1 and the epithelial markers CDH1, EPCAM, KRT19, and KRT7. A 3'UTR luciferase assay confirmed FOXN1 to be a target of the two miRNAs, and up-regulation of FOXN1 in NT2/D1 cells led to the expression of epithelial markers. Overexpression of the two miRNAs in BMP-2-treated NT2/D1 cells led to down-regulation of FOXN1 and epithelial lineage markers. These results show that miR-18b and miR-518b are upstream controllers of FOXN1-directed epithelial lineage development.