A rapid cascade of regulatory events defines the developmental fates of embryonic cells. However, once established, these developmental fates and the underlying transcriptional programs can be remarkably stable. Here, we describe two proteins, MEP-1 and LET-418/Mi-2, required for maintenance of somatic differentiation in C. elegans. In animals lacking MEP-1 and LET-418, germline-specific genes become derepressed in somatic cells, and Polycomb group (PcG) and SET domain-related proteins promote this ectopic expression. MEP-1 and LET-418 interact in vivo with the germline-protein PIE-1. Our findings support a model in which PIE-1 inhibits MEP-1 and associated factors to maintain the pluripotency of germ cells, while at later times MEP-1 and LET-418 remodel chromatin to establish new stage- or cell-type-specific differentiation potential.