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Mouse embryonic stem cells are dynamic and heterogeneous. For example, rare cells cycle through a state characterized by decondensed chromatin and expression of transcripts, including the Zscan4 cluster and MERVL endogenous retrovirus, which are usually restricted to preimplantation embryos. Here, we further characterize the dynamics and consequences of this transient cell state. Single-cell transcriptomics identified the earliest upregulated transcripts as cells enter the MERVL/Zscan4 state. The MERVL/Zscan4 transcriptional network was also upregulated during induced pluripotent stem cell reprogramming. Genome-wide DNA methylation and chromatin analyses revealed global DNA hypomethylation accompanying increased chromatin accessibility. This transient DNA demethylation was driven by a loss of DNA methyltransferase proteins in the cells and occurred genome-wide. While methylation levels were restored once cells exit this state, genomic imprints remained hypomethylated, demonstrating a potential global and enduring influence of endogenous retroviral activation on the epigenome.