The extensive array of basic helix-loop-helix (bHLH) transcription factors and their combinations as dimers underpin the diversity of molecular function required for cell type specification during embryogenesis. The bHLH factor TWIST1 plays pleiotropic roles during development. However, which combinations of TWIST1 dimers are involved and what impact each dimer imposes on the gene regulation network controlled by TWIST1 remain elusive. In this work, proteomic profiling of human TWIST1-expressing cell lines and transcriptome analysis of mouse cranial mesenchyme have revealed that TWIST1 homodimers and heterodimers with TCF3, TCF4, and TCF12 E-proteins are the predominant dimer combinations. Disease-causing mutations in TWIST1 can impact dimer formation or shift the balance of different types of TWIST1 dimers in the cell, which may underpin the defective differentiation of the craniofacial mesenchyme. Functional analyses of the loss and gain of TWIST1–E-protein dimer activity have revealed previously unappreciated roles in guiding lineage differentiation of embryonic stem cells: TWIST1–E-protein heterodimers activate the differentiation of mesoderm and neural crest cells, which is accompanied by the epithelial-to-mesenchymal transition. At the same time, TWIST1 homodimers maintain the stem cells in a progenitor state and block entry to the endoderm lineage.