Development is a highly controlled process of cell proliferation and differentiation driven by mechanisms of dynamic gene regulation. Specific DNA binding factors for establishing cell-and tissue-specific transcriptional programs have been characterised in different cell and animal models. However, much less is known about the role of “core transcription machinery” during cell differentiation, given that general transcription factors and their spatiotemporally patterned activity govern different aspects of cell function. In this review, we focus on the role of TATA-box associated factor 4 (TAF4) and its functional isoforms generated by alternative splicing in controlling lineage-specific differentiation of normal mesenchymal stem cells and cancer stem cells. In the light of our recent findings, induction, control and maintenance of cell differentiation status implies diversification of the transcription initiation apparatus orchestrated by alternative splicing.