Chromatin modifiers affect spatiotemporal gene expression programs that underlie organismal development. The Polycomb repressive complex 2 (PRC2) is a crucial chromatin modifier in executing neurodevelopmental programs. Here, we find that PRC2 interacts with the nucleic acid-binding protein Ybx1. In the mouse embryo in vivo, Ybx1 is required for forebrain specification and restricting mid-hindbrain growth. In neural progenitor cells (NPCs), Ybx1 controls self-renewal and neuronal differentiation. Mechanistically, Ybx1 highly overlaps PRC2 binding genome-wide, controls PRC2 distribution, and inhibits H3K27me3 levels. These functions are consistent with Ybx1-mediated promotion of genes involved in forebrain specification, cell proliferation, or neuronal differentiation. In Ybx1-knockout NPCs, H3K27me3 reduction by PRC2 enzymatic inhibitor or genetic depletion partially rescues gene expression and NPC functions. Our findings suggest that Ybx1 fine-tunes PRC2 activities to regulate spatiotemporal gene expression in embryonic neural development and uncover a crucial epigenetic mechanism balancing forebrain-hindbrain lineages and self-renewal-differentiation choices in NPCs.