Maternal diabetes mellitus is among the most frequent environmental contributors to congenital birth defects, including heart defects and craniofacial anomalies, yet the cell types affected and mechanisms of disruption are largely unknown. Using multi-modal single cell analyses, here we show that maternal diabetes affects the epigenomic landscape of specific subsets of cardiac and craniofacial progenitors during embryogenesis. A previously unrecognized cardiac progenitor subpopulation expressing the homeodomain-containing protein ALX3 showed prominent chromatin accessibility changes and acquired a more posterior identity. Similarly, a subpopulation of neural crest-derived cells in the second pharyngeal arch, which contributes to craniofacial structures, displayed abnormalities in the epigenetic landscape and axial patterning defects. Chromatin accessibility changes in both populations were associated with increased retinoic acid signaling, known to establish anterior-posterior identity. This work highlights how an environmental insult can have highly selective epigenomic consequences on discrete cell types leading to developmental patterning defects.