Embryonic stem cells (ESCs) represent an ideal model to study how lineage decisions are established during embryonic development. Using a doxycycline-inducible mouse ESC line, we have previously shown that expression of the transcriptional activator Pax3 in early mesodermal cells leads to the robust generation of paraxial mesoderm progenitors that ultimately differentiate into skeletal muscle precursors. Here, we show that the ability of this transcription factor to induce the skeletal myogenic cell fate occurs at the expenses of the cardiac lineage. Our results show that the PDGFRα+FLK1--subfraction represents the main population affected by Pax3, through downregulation of several transcripts encoding for proteins involved in cardiac development. We demonstrate that although Nkx2-5, Tbx5, and Gata4 negatively affect Pax3 skeletal myogenic activity, the cardiac potential of embryoid body-derived cultures is restored solely by forced expression of Tbx5. Taking advantage of this model, we used an unbiased genome-wide approach to identify genes whose expression is rescued by Tbx5, and which could represent important regulators of cardiac development. These findings elucidate mechanisms regulating the commitment of mesodermal cells in the early embryo and identify the Tbx5 cardiac transcriptome.