Polycomb group (PcG) proteins are transcriptional repressors, which regulate proliferation and cell fate decisions during development, and their deregulated expression is a frequent event in human tumours. The Polycomb repressive complex 2 (PRC2) catalyzes trimethylation (me3) of histone H3 lysine 27 (K27), and it is believed that this activity mediates transcriptional repression. Despite the recent progress in understanding PcG function, the molecular mechanisms by which the PcG proteins repress transcription, as well as the mechanisms that lead to the activation of PcG target genes are poorly understood. To gain insight into these mechanisms, we have determined the global changes in histone modifications in embryonic stem (ES) cells lacking the PcG protein Suz12 that is essential for PRC2 activity. We show that loss of PRC2 activity results in a global increase in H3K27 acetylation. The methylation to acetylation switch correlates with the transcriptional activation of PcG target genes, both during ES cell differentiation and in MLL-AF9-transduced hematopoietic stem cells. Moreover, we provide evidence that the acetylation of H3K27 is catalyzed by the acetyltransferases p300 and CBP. Based on these data, we propose that the PcG proteins in part repress transcription by preventing the binding of acetyltransferases to PcG target genes.