BACKGROUND: Pluripotency, the capacity for indefinite self-renewal and differentiation into diverse cell types is a unique state exhibited by embryonic stem (ES) cells. Transcriptional regulators, such as Oct4, are critical for pluripotency, but the role of epigenetic modifiers remains to be fully elucidated. RESULTS: Here, we show that ERG-associated protein with SET domain (ESET), a histone methyltransferase enzyme, maintains pluripotency through repression of Cdx2, a key trophectoderm determinant, by histone H3 lysine 9 trimethylation (H3K9me3) of the promoter region. Notably, this repression is mediated through the synergistic function of small ubiquitin-related modifier (SUMO)ylated ESET and Oct4. ESET localises to the promyelocytic leukaemia (PML) nuclear bodies and is SUMOylated in ES cells. Interaction of ESET with Oct4 depends on a SUMO-interacting motif (SIM) in Oct4, which is critical for the repression of Cdx2. CONCLUSION: Loss of ESET or Oct4 results in strikingly similar phenotypes both in ES cells with their differentiation into trophectoderm cells, and in early embryos where there is a failure of development of the pluripotent inner cell mass (ICM) of blastocysts. We propose that SUMOylated ESET-Oct4 complex is critical for both the initiation and maintenance of pluripotency through repression of differentiation, particularly of the trophectoderm lineage by epigenetic silencing of Cdx2.