Polycomb repressive complex‐2 (PRC2) is a group of proteins that play an important role during development and in cell differentiation. PRC2 is a histone‐modifying complex that catalyses methylation of lysine 27 of histone H3 (H3K27me3) at differentiation genes leading to their transcriptional repression. JARID2 is a co‐factor of PRC2 and is important for targeting PRC2 to chromatin. Here, we show that, unlike in embryonic stem cells, in lineage‐committed human cells, including human epidermal keratinocytes, JARID2 predominantly exists as a novel low molecular weight form, which lacks the N‐terminal PRC2‐interacting domain (ΔN‐JARID2). We show that ΔN‐JARID2 is a cleaved product of full‐length JARID2 spanning the C‐terminal conserved jumonji domains. JARID2 knockout in keratinocytes results in up‐regulation of cell cycle genes and repression of many epidermal differentiation genes. Surprisingly, repression of epidermal differentiation genes in JARID2‐null keratinocytes can be rescued by expression of ΔN‐JARID2 suggesting that, in contrast to PRC2, ΔN‐JARID2 promotes activation of differentiation genes. We propose that a switch from expression of full‐length JARID2 to ΔN‐JARID2 is important for the up‐regulation differentiation genes. Synopsis: JARID2, a cofactor of polycomb repressive complex 2 (PRC2) that is thought to act only in embryonic stem cells, exists in a truncated form in lineage‐committed human cells, where it counteracts PRC2 function and facilitates activation of differentiation genes. Lineage‐committed cells lack full‐length JARID2 (140 kDa) but express a short form (80 kDa) lacking the N‐terminus (ΔN‐JARID2).Unlike JARID2, ΔN‐JARID2 cannot interact with polycomb protein EZH2.ΔN‐JARID2 opposes polycomb function and is needed for the activation of differentiation genes. Proteolytic cleavage turns JARID2 from a polycomb repressive complex 2 cofactor in stems cells to an activator of gene expression upon differentiation. [ABSTRACT FROM AUTHOR]