Numerous chromatin regulators are required for embryonic stem (ES) cell self-renewal and pluripotency, but few have been studied in detail. Here, we examine the roles of several chromatin regulators whose loss affects the pluripotent state of ES cells. We find that Mbd3 and Brg1 antagonistically regulate a common set of genes by regulating promoter-proximal nucleosome occupancy and recruitment of RNA polymerase II. Furthermore, both Mbd3 and Brg1 play key roles in the biology of 5-hydroxymethylcytosine (5hmC): Mbd3 colocalizes with both Tet1 and 5hmC in vivo, its localization is Tet1-dependent, and binding of Mbd3/NURD to DNA in vitro is inhibited by methylcytosine, but not hydroxymethylcytosine. Finally, both Mbd3 and Brg1 are themselves required for normal levels of 5hmC in vivo. Together, our results identify an effector for 5hmC, and reveal that control of gene expression by antagonistic chromatin regulators is a surprisingly common regulatory strategy in ES cells. Genomic binding profiles of Mbd3 in normal ES cells, along with ES cells depleted of additional chromatin regulators, Brg1 and Tet1 were performed by ChIP-seq. In addition, we performed mapping of RNA Polymerase II in control (EGFP), Mbd3 and Brg1 knockdown ES cells by ChIP-seq.