Transcription of endogenous retroviruses (ERVs) is inhibited by de novo DNA methylation during gametogenesis, a process initiated after birth in oocytes and at approximately embryonic day 15.5 (E15.5) in prospermatogonia. Earlier in germline development, the genome, including most retrotransposons, is progressively demethylated. Young ERVK and ERV1 elements, however, retain intermediate methylation levels. As DNA methylation reaches a low point in E13.5 primordial germ cells (PGCs) of both sexes, we determined whether retrotransposons are marked by H3K9me3 and H3K27me3 using a recently developed low-input ChIP-seq (chromatin immunoprecipitation [ChIP] combined with deep sequencing) method. Although these repressive histone modifications are found predominantly on distinct genomic regions in E13.5 PGCs, they concurrently mark partially methylated long terminal repeats (LTRs) and LINE1 elements. Germline-specific conditional knockout of the H3K9 methyltransferase SETDB1 yields a decrease of both marks and DNA methylation at H3K9me3-enriched retrotransposon families. Strikingly, Setdb1 knockout E13.5 PGCs show concomitant derepression of many marked ERVs, including intracisternal A particle (IAP), ETn, and ERVK10C elements, and ERV-proximal genes, a subset in a sex-dependent manner. Furthermore, Setdb1 deficiency is associated with a reduced number of male E13.5 PGCs and postnatal hypogonadism in both sexes. Taken together, these observations reveal that SETDB1 is an essential guardian against proviral expression prior to the onset of de novo DNA methylation in the germline.