Alternative transcription start sites in a given locus can lead to the expression of different protein isoforms of different functions. The Polycomb Repressive Complex 2 (PRC2) is a chromatin modifier essential to repress cell-type specific genes during development. The PRC2 subunit AEBP2 has two different types of isoforms, long (AEPB2S) and short (AEBP2L), that are produced from alternative transcription start sites, but their mechanism of action is unknown. Using CAGE-seq data analysis, immunoblotting and with promoter-specific CRISPR knockout in stem cells, we show that both AEPB2S and AEBP2L are present during early embryogenesis, but later AEBP2L is the predominant isoform. Enzymatic and binding assays in vitro indicate that AEPB2L inhibits both DNA binding by PRC2 and its enzymatic activity. ChIP-Rx (quantitative ChIP-seq) indicates that AEPB2L impairs PRC2 binding to target genes in embryonic stem cells. In contrast, AEBP2S promotes the DNA-binding activity of PRC2 and is essential for de novo repression of target genes during the transition from naïve to primed pluripotency. Mechanistically, through high-resolution Cryo-EM and mutagenesis, we show that the recently evolved, negatively charged N-terminal internally disordered (IDR) region of AEBP2L inhibits the chromatin binding activity of PRC2. We propose a model in which the N-terminus IDR of AEPB2L arose in vertebrates to restrain the transcriptional repression activity of PRC2 in somatic cells.