Malignant peripheral nerve sheath tumors (MPNSTs) represent a group of highly aggressive soft-tissue sarcomas that may occur sporadically, in association with neurofibromatosis type I (NF1 associated) or after radiotherapy. Using comprehensive genomic approaches, we identified loss-of-function somatic alterations of the Polycomb repressive complex 2 (PRC2) components (EED or SUZ12) in 92% of sporadic, 70% of NF1-associated and 90% of radiotherapy-associated MPNSTs. MPNSTs with PRC2 loss showed complete loss of trimethylation at lysine 27 of histone H3 (H3K27me3) and aberrant transcriptional activation of multiple PRC2-repressed homeobox master regulators and their regulated developmental pathways. Introduction of the lost PRC2 component in a PRC2-deficient MPNST cell line restored H3K27me3 levels and decreased cell growth. Additionally, we identified frequent somatic alterations of CDKN2A (81% of all MPNSTs) and NF1 (72% of non-NF1-associated MPNSTs), both of which significantly co-occur with PRC2 alterations. The highly recurrent and specific inactivation of PRC2 components, NF1 and CDKN2A highlights their critical and potentially cooperative roles in MPNST pathogenesis.