Endogenous retroviruses (ERVs) are remnants of ancient retroviral infections, and comprise nearly 8% of the human genome1. The most recently acquired human ERV is HERVK(HML-2), which repeatedly infected the primate lineage both before and after the divergence of the human and chimpanzee common ancestor2,3. Unlike most other human ERVs, HERVK retained multiple copies of intact open reading frames encoding retroviral proteins4. However, HERVK is transcriptionally silenced by the host, with the exception of in certain pathological contexts such as germ-cell tumours, melanoma or human immunodeficiency virus (HIV) infection5-7. Here we demonstrate that DNA hypomethylation at long terminal repeat elements representing the most recent genomic integrations, together with transactivation by OCT4 (also known as POU5F1), synergistically facilitate HERVK expression. Consequently, HERVK is transcribed during normal human embryogenesis, beginning with embryonic genome activation at the eight-cell stage, continuing through the emergence of epiblast cells in preimplantation blastocysts, and ceasing during human embryonic stem cell derivation from blastocyst outgrowths. Remarkably, we detected HERVK viral-like particles and Gag proteins in human blastocysts, indicating that early human development proceeds in the presence of retroviral products. We further show that overexpression of one such product, the HERVK accessory protein Rec, in a pluripotent cell line is sufficient to increase IFITM1 levels on the cell surface and inhibit viral infection, suggesting at least one mechanism through which HERVK can induce viral restriction pathways in early embryonic cells. Moreover, Rec directly binds a subset of cellular RNAs and modulates their ribosome occupancy, indicating that complex interactions between retroviral proteins and host factors can fine-tune pathways of early human development.