Polycomb Repressor Complexes (PRCs) are important regulators of embryogenesis. In embryonic stem (ES) cells many genes that regulate subsequent stages in development are enriched at their promoters for PRC1, PRC2 and Ser 5-phosphorylated RNA Polymerase II (RNAP), and contain domains of 'bivalent' chromatin (enriched for H3K4me3; histone H3 di- or trimethylated at Lys 4 and H3K27me3; histone H3 trimethylated at Lys 27). Loss of individual PRC components in ES cells can lead to gene de-repression and to unscheduled differentiation. Here we show that Jarid2 is a novel subunit of PRC2 that is required for the co-recruitment of PRC1 and RNAP to genes that regulate development in ES cells. Jarid2-deficient ES cells showed reduced H3K4me2/me3 and H3K27me3 marking and PRC1/PRC2 recruitment, and did not efficiently establish Ser 5-phosporylated RNAP at target genes. ES cells lacking Jarid2, in contrast to previously characterized PRC1 and PRC2 mutants, did not inappropriately express PRC2 target genes. Instead, they show a severely compromised capacity for successful differentiation towards neural or mesodermal fates and failed to correctly initiate lineage-specific gene expression in vitro. Collectively, these data indicate that transcriptional priming of bivalent genes in pluripotent ES cells is Jarid2-dependent, and suggests that priming is critical for subsequent multi-lineage differentiation.