Transposable elements represent nearly half of mammalian genomes and are generally described as parasites, or "junk DNA." The LINE1 retrotransposon is the most abundant class and is thought to be deleterious for cells, yet it is paradoxically highly expressed during early development. Here, we report that LINE1 plays essential roles in mouse embryonic stem cells (ESCs) and pre-implantation embryos. In ESCs, LINE1 acts as a nuclear RNA scaffold that recruits Nucleolin and Kap1/Trim28 to repress Dux, the master activator of a transcriptional program specific to the 2-cell embryo. In parallel, LINE1 RNA mediates binding of Nucleolin and Kap1 to rDNA, promoting rRNA synthesis and ESC self-renewal. In embryos, LINE1 RNA is required for Dux silencing, synthesis of rRNA, and exit from the 2-cell stage. The results reveal an essential partnership between LINE1 RNA, Nucleolin, Kap1, and peri-nucleolar chromatin in the regulation of transcription, developmental potency, and ESC self-renewal.