Induction of pluripotency from somatic cells by exogenous transcription factors is made possible by a variety of epigenetic changes that take place during the reprogramming process. The derivation of fully reprogrammed induced pluripotent stem (iPS) cells is achieved through establishment of embryonic stem cell (ESC)-like epigenetic architecture permitting the reactivation of key endogenous pluripotency-related genes, establishment of appropriate bivalent chromatin domains and DNA hypomethylation of genomic heterochromatic regions. Restructuring of the epigenetic landscape, however, is a very inefficient process and the vast majority of the induced cells fail to complete the reprogramming process. Optimal ESC-like epigenetic reorganization is necessary for all reliable downstream uses of iPS cells, including in vitro modeling of disease and clinical applications. Here, we discuss the key advancements in the understanding of dynamic epigenetic changes taking place over the course of the reprogramming process and how aberrant epigenetic remodeling may impact downstream applications of iPS cell technology.