The RB and E2F proteins play important roles in the regulation of cell division, cell death, and development by controlling the expression of genes involved in these processes. The mechanisms of repression by the retinoblastoma protein (pRB) have been extensively studied at cell cycle-regulated promoters. However, little is known about developmentally regulated E2F/RB genes. Here, we have taken advantage of the simplicity of the E2F/RB pathway in flies to inspect the regulation of differentiation-specific target genes. These genes are repressed by dE2F2/RBF and a recently identified RB-containing complex, dREAM/MMB, in a cell type- and cell cycle-independent manner. Our studies indicate that the mechanism of repression differs from that of cell cycle-regulated genes. We find that two different activities are involved in their regulation and that in proliferating cells, both are required to maintain repression. First, dE2F2/RBF and dREAM/MMB employ histone deacetylase (HDAC) activities at promoter regions. Remarkably, we have also uncovered an unconventional mechanism of repression by the Polycomb group (PcG) protein Enhancer of zeste [E(Z)], which is involved in silencing of these genes through the dimethylation of histone H3 Lys27 at nucleosomes located downstream of the transcription start sites (TSS).