Little is known about the molecular mechanism(s) governing differentiation decisions in embryonic stem cells (ESCs). To identify factors critical for ESC lineage formation, we carried out a functional genetic screen for factors affecting Nanog promoter activity during mESC differentiation. We report that members of the PBAF chromatin remodeling complex, including Smarca4/Brg1, Smarcb1/Baf47, Smarcc1/Baf155, and Smarce1/Baf57, are required for the repression of Nanog and other self-renewal gene expression upon mouse ESC (mESC) differentiation. Knockdown of Smarcc1 or Smarce1 suppressed loss of Nanog expression in multiple forms of differentiation. This effect occurred in the absence of self-renewal factors normally required for Nanog expression (e.g., Oct4), possibly indicating that changes in chromatin structure, rather than loss of self-renewal gene transcription per se, trigger differentiation. Consistent with this notion, mechanistic studies demonstrated that expression of Smarcc1 is necessary for heterochromatin formation and chromatin compaction during differentiation. Collectively, our data reveal that Smarcc1 plays important roles in facilitating mESCs differentiation by coupling gene repression with global and local changes in chromatin structure.