Murine embryonic stem cells (ESCs) are self-renewing, pluripotent cells able to differentiate into cells of all three germ layers. Pluripotency and self-renewal are maintained primarily by the core transcriptional factors Nanog, Oct4 and Sox2, but require the cooperation of other factors and coregulators and an efficient telomere maintenance mechanism. In mammals, telomere maintenance is achieved via a telomerase reverse transcriptase (Tert) that acts together with an RNA component (Terc). Maintenance of functional telomeres is essential to allow ESC proliferation, nevertheless if and how it is involved in the achievement and preservation of cell differentiation is still unknown. Here, we used Tert deficient mouse ESCs to elucidate the role of telomere length in differentiation. We found that Tert-/- ESCs with critically short telomeres are delayed, but still capable, to achieve differentiation after leukemia inhibitory factor (LIF) withdrawal and all-trans retinoic acid (ATRA) treatment, but failed to maintain it after LIF re-introduction to the growth medium. Telomere shortening effect on differentiation was accompanied by pluripotency gene dysregulation (e.g. Nanog overexpression), DNA hypomethylation and epigenetic disorders. This phenotype of metastable differentiation could be rescued by telomere lengthening via re-introduction of Tert, depletion of Nanog via short hairpin RNA, or via enforced expression of the de novo DNA methyltransferase 3b. These results reveal an unanticipated role of telomeres in the epigenetic regulation of gene expression and cell fate determination during physiological or pathological processes.