Embryonic stem (ES) cells hold immense promise for the treatment of human degenerative disease. Because ES cells are pluripotent, they can be directed to differentiate into a number of alternative cell-types with potential therapeutic value. Such attempts at "rationally-directed ES cell differentiation" constitute attempts to recapitulate aspects of normal development in vitro. All differentiated cells retain identical DNA content, yet gene expression varies widely from cell-type to cell-type. Therefore, a potent epigenetic system has evolved to coordinate and maintain tissue-specific patterns of gene expression. Recent advances show that mechanisms that govern epigenetic regulation of gene expression are rooted in the details of chromatin dynamics. As embryonic cells differentiate, certain genes are activated while others are silenced. These activation and silencing events are exquisitely coordinated with the allocation of cell lineages. Remodeling of the chromatin of developmentally-regulated genes occurs in conjunction with lineage commitment. Oocytes, early embryos, and ES cells contain potent chromatin-remodeling activities, an observation that suggests that chromatin dynamics may be especially important for early lineage decisions. Chromatin dynamics are also involved in the differentiation of adult stem cells, where the assembly of specialized chromatin upon tissue-specific genes has been studied in fine detail. The next few years will likely yield striking advances in the understanding of stem cell differentiation and developmental biology from the perspective of chromatin dynamics.