Transcription factors and chromatin modifiers are important in the programming and reprogramming of cellular states during development. Transcription factors bind to enhancer elements and recruit coactivators and chromatin-modifying enzymes to facilitate transcription initiation. During differentiation a subset of these enhancers must be silenced, but the mechanisms underlying enhancer silencing are poorly understood. Here we show that the histone demethylase lysine-specific demethylase 1 (LSD1; ref. 5), which demethylates histone H3 on Lys 4 or Lys 9 (H3K4/K9), is essential in decommissioning enhancers during the differentiation of mouse embryonic stem cells (ESCs). LSD1 occupies enhancers of active genes that are critical for control of the state of ESCs. However, LSD1 is not essential for the maintenance of ESC identity. Instead, ESCs lacking LSD1 activity fail to differentiate fully, and ESC-specific enhancers fail to undergo the histone demethylation events associated with differentiation. At active enhancers, LSD1 is a component of the NuRD (nucleosome remodelling and histone deacetylase) complex, which contains additional subunits that are necessary for ESC differentiation. We propose that the LSD1-NuRD complex decommissions enhancers of the pluripotency program during differentiation, which is essential for the complete shutdown of the ESC gene expression program and the transition to new cell states.