It has been generally accepted that the mammalian embryo starts its development with all cells identical, and only when inside and outside cells form do differences between cells first emerge. However, recent findings show that cells in the mouse embryo can differ in their developmental fate and potency as early as the four-cell stage^,,,. These differences depend on the orientation and order of the cleavage divisions that generated them^,. Because epigenetic marks are suggested to be involved in sustaining pluripotency^,, we considered that such developmental properties might be achieved through epigenetic mechanisms. Here we show that modification of histone H3, through the methylation of specific arginine residues, is correlated with cell fate and potency. Levels of H3 methylation at specific arginine residues are maximal in four-cell blastomeres that will contribute to the inner cell mass (ICM) and polar trophectoderm and undertake full development when combined together in chimaeras. Arginine methylation of H3 is minimal in cells whose progeny contributes more to the mural trophectoderm and that show compromised development when combined in chimaeras. This suggests that higher levels of H3 arginine methylation predispose blastomeres to contribute to the pluripotent cells of the ICM. We confirm this prediction by overexpressing the H3-specific arginine methyltransferase CARM1 in individual blastomeres and show that this directs their progeny to the ICM and results in a dramatic upregulation of Nanog and Sox2. Thus, our results identify specific histone modifications as the earliest known epigenetic marker contributing to development of ICM and show that manipulation of epigenetic information influences cell fate determination.