Rhabdoid tumors (RT) are rare and highly aggressive pediatric neoplasms. Their epigenetically-driven intertumoral heterogeneity is well described; however, the cellular origin of RT remains an enigma. Here, we establish and characterize different genetically engineered mouse models driven under the control of distinct promoters and being active in early progenitor cell types with diverse embryonic onsets. From all models only Sox2-positive progenitor cells give rise to murine RT. Using single-cell analyses, we identify distinct cells of origin for the SHH and MYC subgroups of RT, rooting in early stages of embryogenesis. Intra- and extracranial MYC tumors harbor common genetic programs and potentially originate from fetal primordial germ cells (PGCs). Using PGC specific Smarcb1 knockout mouse models we validate that MYC RT originate from these progenitor cells. We uncover an epigenetic imbalance in MYC tumors compared to PGCs being sustained by epigenetically-driven subpopulations. Importantly, treatments with the DNA demethylating agent decitabine successfully impair tumor growth in vitro and in vivo. In summary, our work sheds light on the origin of RT and supports the clinical relevance of DNA methyltransferase inhibitors against this disease.