Transposable elements comprise roughly 40% of mammalian genomes1. They have an active role in genetic variation, adaptation and evolution through the duplication or deletion of genes or their regulatory elements2-4, and transposable elements themselves can act as alternative promoters for nearby genes, resulting in non-canonical regulation of transcription5,6. However, transposable element activity can lead to detrimental genome instability7, and hosts have evolved mechanisms to silence transposable element mobility appropriately8,9. Recent studies have demonstrated that a subset of transposable elements, endogenous retroviral elements (ERVs) containing long terminal repeats (LTRs), are silenced through trimethylation of histone H3 on lysine 9 (H3K9me3) by ESET (also known as SETDB1 or KMT1E)10and a co-repressor complex containing KRAB-associated protein 1 (KAP1; also known as TRIM28)11in mouse embryonic stem cells. Here we show that the replacement histone variant H3.3 is enriched at class I and class II ERVs, notably those of the early transposon (ETn)/MusD family and intracisternal A-type particles (IAPs). Deposition at a subset of these elements is dependent upon the H3.3 chaperone complex containing α-thalassaemia/mental retardation syndrome X-linked (ATRX)12and death-domain-associated protein (DAXX)12-14. We demonstrate that recruitment of DAXX, H3.3 and KAP1 to ERVs is co-dependent and occurs upstream of ESET, linking H3.3 to ERV-associated H3K9me3. Importantly, H3K9me3 is reduced at ERVs upon H3.3 deletion, resulting in derepression and dysregulation of adjacent, endogenous genes, along with increased retrotransposition of IAPs. Our study identifies a unique heterochromatin state marked by the presence of both H3.3 and H3K9me3, and establishes an important role for H3.3 in control of ERV retrotransposition in embryonic stem cells.