Polycomb repressive complex 2 (PRC2) is a critical epigenetic regulator in many biological processes, including maintenance of cell identity, stem cell self-renewal, differentiation, and deregulation of PRC2 is often observed in human cancers and diseases. Here we report that KDM5B (PLU-1/JARID1B), a histone lysine demethylase of Jumonji family, associates with PRC2 and colocalizes with PRC2 in nuclear bodies, and their physical association is dependent on direct interaction between KDM5B and the SUZ12 component of PRC2. Interestingly, co-occupancy of KDM5B and PRC2 was evidenced at the conserved cis-regulatory DNA element on retinoic acid (RA) responsive genes. Transcription readout and in vitro pull-down experiments suggest that KDM5B is an essential co-activator, but not a co-repressor, for the RA signaling, and the interface between KDM5B's JMJC domain and retinoic acid receptor α (RARα) is crucial for RA-mediated gene expression. Detailed chromatin immunoprecipitation assays addressed the seemingly paradox by revealing a biphasic effect of KDM5B on RA-induced gene activation through decoupled H3K4me3 demethylation and PRC2-antagonizing activities. These results demonstrate that KDM5B and PRC2 regulate RA signaling cascade in a cooperative and orchestrated fashion. J. Cell. Biochem. 115: 1528–1538, 2014. © 2014 Wiley Periodicals, Inc.