Polycomb gene silencing requires histone methyltransferase activity of Polycomb repressive complex 2 (PRC2), which methylates lysine 27 of histone H3. Information on how PRC2 works is limited by lack of structural data on the catalytic subunit, Enhancer of zeste (E(Z)), and the paucity of E(z) mutant alleles that alter its SET domain. Here we analyze missense alleles of Drosophila E(z), selected for molecular study because of their dominant genetic effects. Four missense alleles identify key E(Z) SET domain residues, and a fifth is located in the adjacent CXC domain. Analysis of mutant PRC2 complexes in vitro, and H3-K27 methylation in vivo, shows that each SET domain mutation disrupts PRC2 histone methyltransferase. Based on known SET domain structures, the mutations likely affect either the lysine-substrate binding pocket, the binding site for the adenosylmethionine methyl donor, or a critical tyrosine predicted to interact with the substrate lysine epsilon-amino group. In contrast, the CXC mutant retains catalytic activity, Lys-27 specificity, and trimethylation capacity. Deletion analysis also reveals a functional requirement for a conserved E(Z) domain N-terminal to CXC and SET. These results identify critical SET domain residues needed for PRC2 enzyme function, and they also emphasize functional inputs from outside the SET domain.