Accurate chromosome segregation during cell division requires that sister chromatids are kept together by cohesin complex until anaphase, when the chromatids separate and distribute to the two daughter cells. Esco2 is an acetyltransferase that is required for the establishment of sister chromatid cohesion during S phase. Here, we report that Esco2 interacts with several component proteins of the CoREST complex, including a transcription corepressor CoREST, histone demethlyase LSD1, HDAC1, HDAC2, BRAF35, and PHF21A. Esco2 also interacts with various histone methyltransferases Suv39h1, SETDB1 and G9a. Esco2 complex purified from HeLa nuclear extract possesses histone H3 K9 methylation activity and functions as a transcription repressor. Esco2 fused to Gal4 DNA binding domain represses transcription by increasing methylation of histone H3 K9 in the promoter region. These results suggest a novel function of Esco2 in transcription repression through modulation of the chromatin structure.