Propagation and differentiation of stem cell populations are tightly regulated to provide sufficient cell numbers for tissue formation while maintaining the stem cell pool. Embryonic parts of the mammalian placenta are generated from differentiating trophoblast stem cells (TSCs) invading the maternal decidua. Here we demonstrate that lysine-specific demethylase 1 (Lsd1) regulates differentiation onset of TSCs. Deletion of Lsd1 in mice results in the reduction of TSC number, diminished formation of trophectoderm tissues and early embryonic lethality. Lsd1-deficient TSCs display features of differentiation initiation, including alterations of cell morphology, and increased migration and invasion. We show that increased TSC motility is mediated by the premature expression of the transcription factor Ovol2 that is directly repressed by Lsd1 in undifferentiated cells. In summary, our data demonstrate that the epigenetic modifier Lsd1 functions as a gatekeeper for the differentiation onset of TSCs, whereby differentiation-associated cell migration is controlled by the transcription factor Ovol2.