Protein O-GlcNAcylation is a monosaccharide post-translational modification maintained by two evolutionarily conserved enzymes, O-GlcNAc transferase (OGT) and O-GlcNAcase (OGA). Mutations in human OGT have recently been associated with neurodevelopmental disorders, although the mechanisms linking O-GlcNAc homeostasis to neurodevelopment are not understood. Here, we investigate the effects of perturbing protein O-GlcNAcylation using transgenic Drosophila lines that overexpress a highly active OGA. We reveal that temporal reduction of protein O-GlcNAcylation in early embryos leads to reduced brain size and olfactory learning in adult Drosophila. Downregulation of O-GlcNAcylation induced by the exogenous OGA activity promotes nuclear foci formation of Polycomb-group protein Polyhomeotic and the accumulation of excess K27 trimethylation of histone H3 (H3K27me3) at the mid-blastula transition. These changes interfere with the zygotic expression of several neurodevelopmental genes, particularly shortgastrulation (sog), a component of an evolutionarily conserved sog-Decapentaplegic (Dpp) signaling system required for neuroectoderm specification. Our findings highlight the importance of early embryonic O-GlcNAcylation homeostasis for the fidelity of facultative heterochromatin redeployment and initial cell fate commitment of neuronal lineages, suggesting a possible mechanism underpinning OGT-associated intellectual disability.