Many studies have revealed pathways of epigenetic gene silencing by Polycomb repressive complex 2 (PRC2) in vivo, but understanding the underlying molecular mechanisms requires biochemistry. Here we analyze interactions of reconstituted human PRC2 with nucleosome complexes. Histone modifications, the H3K27M cancer mutation, and inclusion of JARID2 or EZH1 in the PRC2 complex have unexpectedly minor effects on PRC2-nucleosome binding. Instead, protein-free linker DNA dominates the PRC2-nucleosome interaction. Specificity for CG-rich sequences is consistent with PRC2 occupying CG-rich DNA in vivo. PRC2 preferentially binds methylated DNA regulated by its AEBP2 subunit, suggesting how DNA and histone methylation collaborate to repress chromatin. We find that RNA, known to inhibit PRC2 activity, is not a methyltransferase inhibitor per se. Instead, RNA sequesters PRC2 from nucleosome substrates, because PRC2 binding requires linker DNA, and RNA and DNA binding are mutually exclusive. Together, we provide a model for PRC2 recruitment and an explanation for how actively transcribed genomic regions bind PRC2 but escape silencing.