The cohesin complex has an essential role in maintaining genome organization. However, its role in gene regulation remains largely unresolved. Here we report that the cohesin release factor WAPL creates a pool of free cohesin, in a process known as cohesin turnover, which reloads it to cell-type-specific binding sites. Paradoxically, stabilization of cohesin binding, following WAPL ablation, results in depletion of cohesin from these cell-type-specific regions, loss of gene expression and differentiation. Chromosome conformation capture experiments show that cohesin turnover is important for maintaining promoter–enhancer loops. Binding of cohesin to cell-type-specific sites is dependent on the pioneer transcription factors OCT4 (POU5F1) and SOX2, but not NANOG. We show the importance of cohesin turnover in controlling transcription and propose that a cycle of cohesin loading and off-loading, instead of static cohesin binding, mediates promoter and enhancer interactions critical for gene regulation.