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Polymorphic integrations of endogenous retroviruses (ERVs) have been previously detected in mouse and human genomes. While most are inert, a subset can influence the activity of the host genes. However, the molecular mechanism underlying how such elements affect the epigenome and transcriptome and their roles in driving intra-specific variation remain unclear. Here, by utilizing wildtype murine embryonic stem cells (mESCs) derived from distinct genetic backgrounds, we discover a polymorphic MMERGLN (GLN) element capable of regulating H3K27ac enrichment and transcription of neighboring loci. We demonstrate that this polymorphic element can enhance the neighboring  Klhdc4  gene expression in  cis , which alters the activity of downstream stress response genes. These results suggest that the polymorphic ERV-derived  cis -regulatory element contributes to differential phenotypes from stimuli between mouse strains. Moreover, we identify thousands of potential polymorphic ERVs in mESCs, a subset of which show an association between proviral activity and nearby chromatin states and transcription. Overall, our findings elucidate the mechanism of how polymorphic ERVs can shape the epigenome and transcriptional networks that give rise to phenotypic divergence between individuals.

Mouse strain-specific polymorphic provirus functions as cis-regulatory element leading to epigenomic and transcriptomic variations