Determining how chromatin is remodelled during early development, when totipotent cells begin to differentiate into specific cell types, is essential to understand how epigenetic states are established. An important mechanism by which chromatin can be remodelled is the replacement of major histones with specific histone variants. During early mammalian development H2A.Z plays an essential, but unknown, function(s). We show here that undifferentiated mouse cells of the inner cell mass lack H2A.Z, but upon differentiation H2A.Z expression is switched on. Strikingly, H2A.Z is first targeted to pericentric hetero chromatin and then to other regions of the nucleus, but is excluded from the inactive X chromosome and the nucleolus. This targeted incorporation of H2A.Z could provide a critical signal to distinguish constitutive from facultative heterochromatin. In support of this model, we demonstrate that H2A.Z can directly interact with the pericentric heterochromatin binding protein INCENP. We propose that H2A.Z functions to establish a specialized pericentric domain by assembling an architecturally distinct chromatin structure and by recruiting specific nuclear proteins.