Covalent modification of histone tails is crucial for transcriptional regulation, mitotic chromosomal condensation, and heterochromatin formation. Histone H3 lysine 9 (H3-K9) methylation catalyzed by the Suv39h family proteins is essential for establishing the architecture of pericentric heterochromatin. We recently identified a mammalian histone methyltransferase (HMTase), G9a, which has strong HMTase activity towards H3-K9 in vitro. To investigate the in vivo functions of G9a, we generated G9a-deficient mice and embryonic stem (ES) cells. We found that H3-K9 methylation was drastically decreased in G9a-deficient embryos, which displayed severe growth retardation and early lethality. G9a-deficient ES cells also exhibited reduced H3-K9 methylation compared to wild-type cells, indicating that G9a is a dominant H3-K9 HMTase in vivo. Importantly, the loss of G9a abolished methylated H3-K9 mostly in euchromatic regions. Finally, G9a exerted a transcriptionally suppressive function that depended on its HMTase activity. Our results indicate that euchromatic H3-K9 methylation regulated by G9a is essential for early embryogenesis and is involved in the transcriptional repression of developmental genes.