During embryogenesis, cell specification and tissue formation is directed by the concentration and temporal presentation of morphogens, and similarly, pluripotent embryonic stem cells differentiate in vitro into various phenotypes in response to morphogen treatment. Embryonic stem cells are commonly differentiated as three dimensional spheroids called embryoid bodies (EBs); however, differentiation within EBs is typically heterogeneous and disordered. Here we show that spatiotemporal control of microenvironmental cues embedded directly within EBs enhances the homogeneity, synchrony and organization of differentiation. Degradable polymer microspheres releasing retinoic acid within EBs induce the formation of cystic spheroids closely resembling the early streak mouse embryo, with an exterior of visceral endoderm enveloping an epiblast layer. These results demonstrate that controlled morphogen presentation to stem cells more efficiently directs cell differentiation and tissue formation, thereby improving developmental biology models and enabling the development of regenerative medicine therapies and cell diagnostics.