Polycomb Group (PcG) proteins are transcriptional repressors that epigenetically modify chromatin and participate in the establishment and maintenance of cell fates. These proteins play important roles in both stem cell self-renewal and in cancer development. Our understanding of their mechanism of action has greatly advanced over the past 10 years, but many unanswered questions remain. In this review, we present the currently available experimental data that connect PcG protein function with some of the key processes which govern somatic stem cell activity. We also highlight recent studies suggesting that a delicate balance in PcG gene dosage is crucial for proper stem cell homeostasis and prevention of cancer stem cell development.