Mouse embryonic stem cell (ESC) cultures contain a rare cell population of "2C-like" cells resembling two-cell embryos, the key stage of zygotic genome activation (ZGA). Little is known about positive regulators of the 2C-like state and two-cell stage embryos. Here we show that GADD45 (growth arrest and DNA damage 45) proteins, regulators of TET (TET methylcytosine dioxygenase)-mediated DNA demethylation, promote both states. Methylome analysis of Gadd45a,b,g triple-knockout (TKO) ESCs reveal locus-specific DNA hypermethylation of ?7000 sites, which are enriched for enhancers and loci undergoing TET-TDG (thymine DNA glycosylase)-mediated demethylation. Gene expression is misregulated in TKOs, notably upon differentiation, and displays signatures of DNMT (DNA methyltransferase) and TET targets. TKOs manifest impaired transition into the 2C-like state and exhibit DNA hypermethylation and down-regulation of 2C-like state-specific genes. Gadd45a,b double-mutant mouse embryos display embryonic sublethality, deregulated ZGA gene expression, and developmental arrest. Our study reveals an unexpected role of GADD45 proteins in embryonic two-cell stage regulation.