Polycomb Repressive Complex 2 (PRC2) catalyzes histone H3 lysine 27 tri-methylation (H3K27me3), an epigenetic modification associated with gene repression. H3K27me3 is enriched at the promoters of a large cohort of developmental genes in embryonic stem cells (ESCs). Loss of H3K27me3 leads to a failure of ESCs to properly differentiate, making it difficult to determine the precise roles of PRC2 during lineage commitment. Moreover, while studies suggest that PRC2 prevents DNA methylation, how these two epigenetic regulators coordinate to regulate lineage programs is poorly understood. Using several PRC2 mutant ESC lines that maintain varying levels of H3K27me3, we found that partial maintenance of H3K27me3 allowed for proper temporal activation of lineage genes during directed differentiation of ESCs to spinal motor neurons (SMNs). In contrast, genes that function to specify other lineages failed to be repressed in these cells, suggesting that PRC2 is also necessary for lineage fidelity. We also found that loss of H3K27me3 leads to a modest gain in DNA methylation at PRC2 target regions in both ESCs and in SMNs. Our study demonstrates a critical role for PRC2 in safeguarding lineage decisions and in protecting genes against inappropriate DNA methylation.