LIN28 is an RNA binding protein with important roles in early embryo development, stem cell differentiation/reprogramming, tumorigenesis and metabolism. Previous studies have focused mainly on its role in the cytosol where it interacts with Let-7 microRNA precursors or mRNAs, and few have addressed LIN28's role within the nucleus. Here, we show that LIN28 displays dynamic temporal and spatial expression during murine embryo development. Maternal LIN28 expression drops upon exit from the 2-cell stage, and zygotic LIN28 protein is induced at the forming nucleolus during 4-cell to blastocyst stage development, to become dominantly expressed in the cytosol after implantation. In cultured pluripotent stem cells (PSCs), loss of LIN28 led to nucleolar stress and activation of a 2-cell/4-cell-like transcriptional program characterized by the expression of endogenous retrovirus genes. Mechanistically, LIN28 binds to small nucleolar RNAs and rRNA to maintain nucleolar integrity, and its loss leads to nucleolar phase separation defects, ribosomal stress and activation of P53 which in turn binds to and activates 2C transcription factor Dux. LIN28 also resides in a complex containing the nucleolar factor Nucleolin (NCL) and the transcriptional repressor TRIM28, and LIN28 loss leads to reduced occupancy of the NCL/TRIM28 complex on the Dux and rDNA loci, and thus de-repressed Dux and reduced rRNA expression. Lin28 knockout cells with nucleolar stress are more likely to assume a slowly cycling, translationally inert and anabolically inactive state, which is a part of previously unappreciated 2C-like transcriptional program. These findings elucidate novel roles for nucleolar LIN28 in PSCs, and a new mechanism linking 2C program and nucleolar functions in PSCs and early embryo development.