High expression of the B1 Sox genes, Sox2 and Sox3, is associated with the development of definitive neural primordia, the neural plates, in early stage embryos. However, in the caudal lateral epiblast (CLE) where axial stem cells reside, Sox2 and Sox3 are expressed at low levels, together with Brachyury. Because axial stem cells are the bipotential precursors of the neural plate and paraxial mesoderm, we investigated the possibility that low-level B1 Sox expression in CLE may regulate the fate of axial stem cells. We combined the genetic conditions of Sox3-null and Sox2 N1 enhancer homozygous deletion (Sox2(ΔN1/ΔN1)) to decrease B1 Sox expression in CLE. At 5-7 somite stages of mouse embryogenesis, these genetic manipulations caused approximately 30% higher production of paraxial mesodermal precursors, resulting in the development of larger somites. Analysis of mitotic cell populations suggested that decrease of B1 Sox expression in CLE does not activate cell proliferation but promotes cell migration into the mesodermal compartment. Thus, the low-level B1 Sox expression in CLE regulates axial stem cells to adjust the production of paraxial mesoderm precursors to an appropriate level.