Polycomb-group proteins are transcriptional repressors with essential roles in embryonic development. Polycomb repressive complex 2 (PRC2) contains the methyltransferase activity for Lys27. However, the role of other histone modifications in regulating PRC2 activity is just beginning to be understood. Here we show that direct recognition of methylated histone H3 Lys36 (H3K36me), a mark associated with activation, by the PRC2 subunit Phf19 is required for the full enzymatic activity of the PRC2 complex. Using NMR spectroscopy, we provide structural evidence for this interaction. Furthermore, we show that Phf19 binds to a subset of PRC2 targets in mouse embryonic stem cells and that this is required for their repression and for H3K27me3 deposition. These findings show that the interaction of Phf19 with H3K36me2 and H3K36me3 is essential for PRC2 complex activity and for proper regulation of gene repression in embryonic stem cells.