Differentiation events in mammalian development involve stable resetting of transcriptional programs, which entails changes in the epigenetic state of target sequences defined by modifications of DNA and bound nucleosomes. These recently identified epigenetic layers modulate DNA accessibility in a positive and negative manner and thus could make genetic readouts context-dependent and dynamic. The proposed project aims to quantify the epigenetic contribution to cellular differentiation as a key event in development. By applying parallel genomic approaches we will comprehensively define the epigenome and its plasticity during cellular commitment of pluripotent murine stem cells into defined terminally differentiated cells. We will focus on DNA methylation and its interplay with several histone modifications as a way to achieve stable gene silencing. The resulting global profiles will gain insights into targeting principles and generate statistical, predictive models of regulation. From these mechanistic models will be derived and tested by genetically interfering with genetic and epigenetic regulatory pathways and by dissecting DNA sequence components involved in specifying targets. These experiments aim to unravel the crosstalk between epigenetic regulation and cell plasticity, the underlying molecular circuitry in pluripotent and unipotent cells and ultimately help to incorporate epigenetic regulation into current transcriptional regulatory models.