The Polycomb group (PcG) of proteins is a major mechanism of epigenetic regulation that has been broadly linked to cancer. This system can repress gene expression by chromatin modification and is essential for establishing cell identity. PcG proteins are important for stem cell function and differentiation and have a profound impact during hematopoiesis. In recent years, several published studies have deepened our knowledge of the biology of the PcG in health and disease. In this article, we review the current understanding of the mechanisms of PcG-mediated repression and their relation to DNA methylation, and we discuss the role of the PcG system in hematopoiesis and hematologic malignancies. We suggest that alteration of different PcG members is a frequent event in leukemia and lymphomas that confers the stem cell properties on tumor cells. Thus, drugs targeting Polycomb complexes could be useful for treating patients with these diseases.