Changes in nuclear organization and the epigenetic state of the genome are important driving forces for developmental gene expression. However, a strategy that allows simultaneous visualization of the dynamics of the epigenomic state and nuclear structure has been lacking to date. We established an experimental system to observe global DNA methylation in living mouse embryonic stem (ES) cells. The methylated DNA binding domain (MBD) and the nuclear localization signal (nls) sequence coding for human methyl CpG-binding domain protein 1 (MBD1) were fused to the enhanced green fluorescent protein (EGFP) reporter gene, and ES cell lines carrying the construct (EGFP-MBD-nls) were established. The EGFP-MBD-nls protein was used to follow DNA methylation in situ under physiological conditions. We also monitored the formation and rearrangement of methylated heterochromatin using EGFP-MBD-nls. Pluripotent mouse ES cells showed unique nuclear organization in that methylated centromeric heterochromatin coalesced to form large clusters around the nucleoli. Upon differentiation, the organization of these heterochromatin clusters changed dramatically. Time-lapse microscopy successfully captured a moment of dramatic change in chromosome positioning during the transition between two differentiation stages. Thus, this experimental system should facilitate studies focusing on relationships between nuclear organization, epigenetic status and cell differentiation.