Cells of early mammalian embryos have the potential to develop into any adult cell type, and are thus said to be pluripotent. Pluripotency is lost during embryogenesis as cells commit to specific developmental pathways. Although restriction of developmental potential is often associated with repression of inappropriate genetic programmes, the role of epigenetic silencing during early lineage commitment remains undefined. Here, we used mouse embryonic stem cells to study the function of epigenetic silencing in pluripotent cells. Embryonic stem cells lacking Mbd3 — a component of the nucleosome remodelling and histone deacetylation (NuRD) complex^, — were viable but failed to completely silence genes that are expressed before implantation of the embryo. Mbd3-deficient embryonic stem cells could be maintained in the absence of leukaemia inhibitory factor (LIF) and could initiate differentiation in embryoid bodies or chimeric embryos, but failed to commit to developmental lineages. Our findings define a role for epigenetic silencing in the cell-fate commitment of pluripotent cells.