Transcript elongation by RNA polymerase II (RNAPII) is accompanied by conserved patterns of histone modification. Whereas histone modifications have established roles in transcription initiation, their functions during elongation are not understood. Mono-ubiquitylation of histone H2B (H2Bub1) plays a key role in coordinating co-transcriptional histone modification by promoting site-specific methylation of histone H3. H2Bub1 also regulates gene expression through an unidentified, methylation-independent mechanism. Here we reveal bidirectional communication between H2Bub1 and Cdk9, the ortholog of metazoan positive transcription elongation factor b (P-TEFb), in the fission yeast Schizosaccharomyces pombe. Chemical and classical genetic analyses indicate that lowering Cdk9 activity or preventing phosphorylation of its substrate, the transcription processivity factor Spt5, reduces H2Bub1 in vivo. Conversely, mutations in the H2Bub1 pathway impair Cdk9 recruitment to chromatin and decrease Spt5 phosphorylation. Moreover, an Spt5 phosphorylation-site mutation, combined with deletion of the histone H3 Lys4 methyltransferase Set1, phenocopies morphologic and growth defects due to H2Bub1 loss, suggesting independent, partially redundant roles for Cdk9 and Set1 downstream of H2Bub1. Surprisingly, mutation of the histone H2B ubiquitin-acceptor residue relaxes the Cdk9 activity requirement in vivo, and cdk9 mutations suppress cell-morphology defects in H2Bub1-deficient strains. Genome-wide analyses by chromatin immunoprecipitation also demonstrate opposing effects of Cdk9 and H2Bub1 on distribution of transcribing RNAPII. Therefore, whereas mutual dependence of H2Bub1 and Spt5 phosphorylation indicates positive feedback, mutual suppression by cdk9 and H2Bub1-pathway mutations suggests antagonistic functions that must be kept in balance to regulate elongation. Loss of H2Bub1 disrupts that balance and leads to deranged gene expression and aberrant cell morphologies, revealing a novel function of a conserved, co-transcriptional histone modification.