Endogenous retroviruses (ERVs) comprise ~10% of mammalian genomes, and ERVs are repressed by multiple cellular mechanisms including heterochromatin, DNA methylation, and methylation of their RNA transcripts 1-13. Although the vast majority of ERVs in mammals are incapable of retrotransposition, ERV de-repression during early development is associated with embryonic lethality 14-16, suggesting that ERV transcription or RNA transcripts may underlie essentiality of ERV repression. Here we report that rapid and selective degradation of the TRIM28 heterochromatin adapter protein in murine embryonic stem cells triggers dissociation of transcriptional condensates from loci encoding super-enhancer -driven pluripotency genes, and association of transcriptional condensates with transcribed ERV loci. Knockdown of ERV RNA or forced expression of super-enhancer -enriched transcription factors rescued condensate localization at super-enhancers in TRIM28-degraded cells. In a biochemical reconstitution system, ERV RNA facilitated phase separation of RNA Polymerase II, and partitioning of NFY and Mediator into heterotypic droplets, suggesting a mechanistic basis for the association of transcriptional condensates with ERVs. Using a zygotic perturbation platform, we found that timing and amount of ERV transcription correlate with the onset of lethality, and that loss of TRIM28 leads to specific depletion of pluripotent lineages in mouse embryos. We propose that retrotransposons contribute to the genomic distribution of nuclear condensates, and that coding and non-coding nascent RNAs may facilitate “hijacking” of transcriptional condensates in various developmental and disease contexts.