Development of primordial germ cells (PGCs) is required for reproduction. During PGC development in mammals, major epigenetic remodeling occurs, which is hypothesized to establish an epigenetic landscape for sex-specific germ cell differentiation and gametogenesis. In order to address the role of embryonic ectoderm development (EED) and histone 3 lysine 27 trimethylation (H3K27me3) in this process, we created an EED conditional knockout mouse and show that EED is essential for regulating the timing of sex-specific PGC differentiation in both ovaries and testes, as well as X chromosome dosage decompensation in testes. Integrating chromatin and whole genome bisulfite sequencing of epiblast and PGCs, we identified a poised repressive signature of H3K27me3/DNA methylation that we propose is established in the epiblast where EED and DNMT1 interact. Thus, EED joins DNMT1 in regulating the timing of sex-specific PGC differentiation during the critical window when the gonadal niche cells specialize into an ovary or testis.