The de novo DNA methyltransferase 3-like (Dnmt3L) is a catalytically inactive DNA methyltransferase that cooperates with Dnmt3a and Dnmt3b to methylate DNA. Dnmt3L is highly expressed in mouse embryonic stem cells (ESCs), but its function in these cells is unknown. Through genome-wide analysis of Dnmt3L knockdown in ESCs, we found that Dnmt3L is a positive regulator of methylation at the gene bodies of housekeeping genes and, more surprisingly, is also a negative regulator of methylation at promoters of bivalent genes. Dnmt3L is required for the differentiation of ESCs into primordial germ cells (PGCs) through the activation of the homeotic gene Rhox5. We demonstrate that Dnmt3L interacts with the Polycomb PRC2 complex in competition with the DNA methyltransferases Dnmt3a and Dnmt3b to maintain low methylation levels at the H3K27me3 regions. Thus, in ESCs, Dnmt3L counteracts the activity of de novo DNA methylases to maintain hypomethylation at promoters of bivalent developmental genes.