Preimplantation development encompasses the interval from insemination until embryo implantation and thus includes the 'freeliving' period of oviduct and uterine development. Formation of the blastocyst is required for implantation and establishment of pregnancy, and is a principal determinant of embryo quality prior to embryo transfer. Development through this period is regulated by the expression of specific gene families that encode for cell polarity, cell junctional, cytoskeletal, ion transporter, and water channel gene products that direct the acquisition of cell polarity and differentiation of the outer cells of the early embryo. This results in the formation of the trophectoderm, which is the first epithelium of development. This review considers the roles of each of these gene families in trophectoderm differentiation and blastocyst formation. The principal hypothesis under investigation is that blastocyst formation is regulated by a Na/K-ATPase-generated trans-trophectoderm ion gradient that promotes the accumulation of water across the epithelium. This, combined with the formation of the tight junction seal controlling paracellular movement of water between adjacent trophectoderm cells, results in the formation of a fluid-filled blastocyst cavity and the expansion of the blastocyst. Results from recent experiments, however, have cast some doubt on the role of Na/K-ATPase in mediating these events and have defined water channels or Aquaporins (AQPs) as physiological mediators of fluid movement across the trophectoderm. In addition, studies have now implicated mitogen-activated protein kinase (MAPK) signaling as an important mediator of development to the blastocyst stage. Such studies define the physiology of blastocyst formation and serve to support the application of assisted reproductive technologies (ART) to both human and animal species.