Induced pluripotent stem cells (iPSCs) can be derived from somatic cells by ectopic expression of different transcription factors, classically Oct4 (also known as Pou5f1), Sox2, Klf4 and Myc (abbreviated as OSKM). This process is accompanied by genome-wide epigenetic changes, but how these chromatin modifications are biochemically determined requires further investigation. Here we show in mice and humans that the histone H3 methylated Lys 27 (H3K27) demethylase Utx (also known as Kdm6a) regulates the efficient induction, rather than maintenance, of pluripotency. Murine embryonic stem cells lacking Utx can execute lineage commitment and contribute to adult chimaeric animals; however, somatic cells lacking Utx fail to robustly reprogram back to the ground state of pluripotency. Utx directly partners with OSK reprogramming factors and uses its histone demethylase catalytic activity to facilitate iPSC formation. Genomic analysis indicates that Utx depletion results in aberrant dynamics of H3K27me3 repressive chromatin demethylation in somatic cells undergoing reprogramming. The latter directly hampers the derepression of potent pluripotency promoting gene modules (including Sall1, Sall4 and Utf1), which can cooperatively substitute for exogenous OSK supplementation in iPSC formation. Remarkably, Utx safeguards the timely execution of H3K27me3 demethylation observed in embryonic day 10.5-11 primordial germ cells (PGCs), and Utx-deficient PGCs show cell-autonomous aberrant epigenetic reprogramming dynamics during their embryonic maturation in vivo. Subsequently, this disrupts PGC development by embryonic day 12.5, and leads to diminished germline transmission in mouse chimaeras generated from Utx-knockout pluripotent cells. Thus, we identify Utx as a novel mediator with distinct functions during the re-establishment of pluripotency and germ cell development. Furthermore, our findings highlight the principle that molecular regulators mediating loss of repressive chromatin during in vivo germ cell reprogramming can be co-opted during in vitro reprogramming towards ground state pluripotency.