SET, the nuclear proto-oncogene, is primarily expressed as SETα in embryonic stem cells. Upon pluripotency exit, a transcriptional switch driven by alternative promoters causes SETβ to largely replace SETα expression. Functional distinctions between the two isoforms have been difficult to ascertain, partly due to the redundancy between SETα and SETβ in their protein structure and activity. In this study, we use embryonic stem cells (ESCs) with inducible SET isoform-specific expression to investigate the differences between both SET isoforms. Time-course RNA-seq analyses in SET-KO backgrounds as well as isoform-specific ChIP-seq experiments reveal regulatory functions for SETα and SETβ. Despite sharing many binding sites and binding partners, SETα has unique regulatory functions on its target genes, while SETβ downregulates FGF4. As KLF5 specifically regulates SETα, this implicates SET isoform switching at the KLF5/FGF signalling axis during primitive endoderm specification. Together, we propose a model of how distinct roles of SETα and SETβ may regulate cell identity in the early blastocyst.