Delivery of the transcription factors Oct4, Klf4, Sox2 and c-Myc via integrating viral vectors has been widely employed to generate induced pluripotent stem cell (iPSC) lines from both normal and disease-specific somatic tissues, providing an invaluable resource for medical research and drug development. Residual reprogramming transgene expression from integrated viruses nevertheless alters the biological properties of iPSCs and has been associated with a reduced developmental competence both in vivo and in vitro. We performed transcriptional profiling of mouse iPSC lines before and after excision of a polycistronic lentiviral reprogramming vector to systematically define the overall impact of persistent transgene expression on the molecular features of iPSCs. We demonstrate that residual expression of the Yamanaka factors prevents iPSCs from acquiring the transcriptional program exhibited by embryonic stem cells (ESCs) and that the expression profiles of iPSCs generated with and without c-Myc are indistinguishable. After vector excision, we find 36% of iPSC clones show normal methylation of the Gtl2 region, an imprinted locus that marks ESC-equivalent iPSC lines. Furthermore, we show that the reprogramming factor Klf4 binds to the promoter region of Gtl2. Regardless of Gtl2 methylation status, we find similar endodermal and hepatocyte differentiation potential comparing syngeneic Gtl2ON vs Gtl2OFF iPSC clones. Our findings provide new insights into the reprogramming process and emphasize the importance of generating iPSCs free of any residual transgene expression.