Canonical Wnt/β-catenin signaling regulates the homeostasis of intestinal epithelium by controlling the balance between intestinal stem cell self-renewal and differentiation but epigenetic mechanisms enacting the process are not known. We hypothesized that epigenetic regulator, Polycomb Repressive Complex-2 (PRC2), is involved in Wnt-mediated epithelial homeostasis on the crypt-villus axis and aberrancies therein are implicated both in celiac disease and in intestinal malignancies. We found that PRC2 establishes repressive crypt and villus specific trimethylation of histone H3 lysine 27 (H3K27me3) signature on genes responsible for, for example, nutrient transport and cell killing in crypts and, for example, proliferation and differentiation in mature villi, suggesting that PRC2 facilitates the Wnt-governed intestinal homeostasis. When celiac patients are on gluten-containing diet PRC2 is out-of-bounds active and consequently its target genes were found affected in intestinal epithelium. Significant set of effective intestinal PRC2 targets are also differentially expressed in colorectal adenoma and carcinomas. Our results suggest that PRC2 gives rise and maintains polar crypt and villus specific H3K27me3 signatures. As H3K27me3 is a mark enriched in developmentally important genes, identified intestinal PRC2 targets are possibly imperative drivers for enterocyte differentiation and intestinal stem cell maintenance downstream to Wnt-signaling. Our work also elucidates the mechanism sustaining the crypt hyperplasia in celiac disease and suggest that PRC2-dependent fostering of epithelial stemness is a common attribute in intestinal diseases in which epithelial hyperplasia or neoplasia prevails. Finally, this work demonstrates that in intestine PRC2 represses genes having both pro-stemness and pro-differentiation functions, fact need to be considered when designing epigenetic therapies including PRC2 as a drug target. Stem Cells 2017;35:445-457.