Trimethylated histone H3 lysine 27 (H3K27me3) regulates gene repression, cell-fate determination and differentiation. We report that a conserved bromo-adjacent homology (BAH) module of BAHCC1 (BAHCC1BAH) ‘recognizes’ H3K27me3 specifically and enforces silencing of H3K27me3-demarcated genes in mammalian cells. Biochemical, structural and integrated chromatin immunoprecipitation-sequencing-based analyses demonstrate that direct readout of H3K27me3 by BAHCC1 is achieved through a hydrophobic trimethyl-l-lysine-binding ‘cage’ formed by BAHCC1BAH, mediating colocalization of BAHCC1 and H3K27me3-marked genes. BAHCC1 is highly expressed in human acute leukemia and interacts with transcriptional corepressors. In leukemia, depletion of BAHCC1, or disruption of the BAHCC1BAH–H3K27me3 interaction, causes derepression of H3K27me3-targeted genes that are involved in tumor suppression and cell differentiation, leading to suppression of oncogenesis. In mice, introduction of a germline mutation at Bahcc1 to disrupt its H3K27me3 engagement causes partial postnatal lethality, supporting a role in development. This study identifies an H3K27me3-directed transduction pathway in mammals that relies on a conserved BAH ‘reader’.