The activation of endogenous Oct4 transcription is a key step in the reprogramming of somatic cells into induced pluripotent stem (iPS) cells but until now it has been difficult to analyze this critical event in the reprogramming process. We have generated a transgenic mouse that expresses the tamoxifen-inducible Cre recombinase MerCreMer under the control of the endogenous Oct4 locus, enabling lineage tracing of Oct4 expression in cells in vivo or in vitro, during either reprogramming or differentiation. Using this novel resource, we have determined the timing and outcome of endogenous Oct4 induction during fibroblast reprogramming. We show that both the initiation of this key reprogramming step and the ability of cells activating endogenous Oct4 expression to complete reprogramming are not influenced by the presence of exogenous c-Myc, although the overall efficiency of the process is increased by c-Myc. Oct4 lineage tracing reveals that new reprogramming events continue to initiate over a period of 3 weeks. Furthermore, the analysis of mixed colonies, where only a subset of daughter cells induce endogenous Oct4 expression, indicates the role of unknown, stochastic events in the progression of reprogramming from the initial events to a pluripotent state. Our transgenic mouse model and cells derived from it provide powerful and precise new tools for the study of iPS cell reprogramming mechanisms and have wider implications for the investigation of the role of Oct4 during development.