Heterochromatic loci marked by histone H3 lysine 9 dimethylation (H3K9me2) are enriched at the nuclear periphery in metazoans, but the effect of spatial position on heterochromatin function has not been defined. Here we remove three nuclear lamins and the lamin B receptor (LBR) in mouse embryonic stem cells and show that heterochromatin detaches from the nuclear periphery. Mutant mouse embryonic stem cells sustain naive pluripotency and maintain H3K9me2 across the genome but cannot repress H3K9me2-marked genes or transposons. Further, mutant cells fail to differentiate into epiblast-like cells, a transition that requires the expansion of H3K9me2 across the genome. Mutant epiblast-like cells can silence naive pluripotency genes and activate epiblast-stage genes. However, H3K9me2 cannot repress markers of alternative fates, including primitive endoderm. We conclude that the lamins and LBR control the spatial position, dynamic remodelling and repressive capacity of H3K9me2-marked heterochromatin to shape cell fate decisions.