Pluripotent cells possess the ability to differentiate into any cell type. Commitment to differentiate into specific lineages requires strict control of gene expression to coordinate the downregulation of lineage inappropriate genes while enabling the expression of lineage-specific genes. The nucleosome remodelling and deacetylation complex (NuRD) is required for lineage commitment of pluripotent cells; however, the mechanism through which it exerts this effect has not been defined. Here, we show that histone deacetylation by NuRD specifies recruitment for Polycomb Repressive Complex 2 (PRC2) in embryonic stem (ES) cells. NuRD-mediated deacetylation of histone H3K27 enables PRC2 recruitment and subsequent H3K27 trimethylation at NuRD target promoters. We propose a gene-specific mechanism for modulating expression of transcriptionally poised genes whereby NuRD controls the balance between acetylation and methylation of histones, thereby precisely directing the expression of genes critical for embryonic development.