The DNA hypomethylation that occurs when embryonic stem cells (ESCs) are directed to the ground state of naive pluripotency by culturing in two small molecule inhibitors (2i) results in redistribution of polycomb (H3K27me3) away from its target loci. Here, we demonstrate that 3D genome organization is also altered in 2i, with chromatin decompaction at polycomb target loci and a loss of long-range polycomb interactions. By preventing DNA hypomethylation during the transition to the ground state, we are able to restore to ESC in 2i the H3K27me3 distribution, as well as polycomb-mediated 3D genome organization that is characteristic of primed ESCs grown in serum. However, these cells retain the functional characteristics of 2i ground-state ESCs. Our findings demonstrate the central role of DNA methylation in shaping major aspects of 3D genome organization but caution against assuming causal roles for the epigenome and 3D genome in gene regulation and function in ESCs.