Embryonic stem cells (ESCs) and induced pluripotent stem cells (iPSCs) can self-renew indefinitely and contribute to all tissue types of the adult organism. Stem cell-based therapeutic approaches hold enormous promise for the cure of regenerative diseases. Over the last few years, several studies have attempted to decipher the important role of transcription factor networks and epigenetic regulatory signals in the maintenance of ESC pluripotency, but the exact underlying mechanisms have yet to be identified. Among the epigenetic factors, chromatin dynamics and structure have been found to contribute greatly to maintenance of pluripotency and regulation of differentiation in ESCs. These modifications include: covalent histone acetylation and methylation, histone bivalents and chromatin remodeling, and DNA methylation. Studies in ESCs have shown that genes associated with early development are arranged within a bivalent chromatin structure. This is thought to be a “poised yet repressed” situation, which can be activated upon differentiation. The breakthrough of iPSCs has opened a new era in stem cell biology. During reprogramming, the chromatin state of differentiated cells is reset to an embryonic form via a largely unknown mechanism. In this review, the fundamental impact of chromatin dynamic in ESCs as well as its critical role in the generation of iPSCs is discussed.