The first mammalian cell lineage commitment is the formation of the trophectoderm (TE) and the inner cell mass (ICM) lineages during preimplantation development. Proper development of the TE and ICM lineages is dependent upon establishment of specific transcriptional programs. However, the epigenetic mechanisms that functionally contribute to establish TE- and ICM-specific transcriptional programs are poorly understood. Here, we show that proper development of the TE and ICM lineages is coordinated via combinatorial regulation of embryonic ectoderm development (EED) and lysine-specific demethylase 6B (KDM6B). During blastocyst formation, the relative levels of EED and KDM6B expression determine altered polycomb repressor 2 (PRC2) complex recruitment and incorporation of the repressive histone H3 lysine 27 trimethylation (H3K27Me3) mark at the chromatin domains of TE-specific master regulators CDX2 and GATA3, leading to their activation in the TE lineage and repression in the ICM lineage. Furthermore, ectopic gain of EED along with depletion of KDM6B in preimplantation mouse embryos abrogates CDX2 and GATA3 expression in the nascent TE lineage. The loss of CDX2 and GATA3 in the nascent TE lineage results in improper TE development, leading to failure in embryo implantation to the uterus. Our study delineates a novel epigenetic mechanism that orchestrates proper development of the first mammalian cell lineages.