Bivalent genes are ready for activation upon the arrival of developmental cues. Here, we report that BEND3 is a CpG island (CGI)-binding protein that is enriched at regulatory elements. The cocrystal structure of BEND3 in complex with its target DNA reveals the structural basis for its DNA methylation-sensitive binding property. Mouse embryos ablated of Bend3 died at the pregastrulation stage. Bend3 null embryonic stem cells (ESCs) exhibited severe defects in differentiation, during which hundreds of CGI-containing bivalent genes were prematurely activated. BEND3 is required for the stable association of polycomb repressive complex 2 (PRC2) at bivalent genes that are highly occupied by BEND3, which suggests a reining function of BEND3 in maintaining high levels of H3K27me3 at these bivalent genes in ESCs to prevent their premature activation in the forthcoming developmental stage.