The histone methyltransferase Polycomb repressive complex 2 (PRC2) is required for specification of the neural crest, and mis-regulation of neural crest development can cause severe congenital malformations. PRC2 is necessary for neural crest induction, but the embryonic, cellular, and molecular consequences of PRC2 activity after neural crest induction are incompletely understood. Here we show that Eed, a core subunit of PRC2, is required for craniofacial osteoblast differentiation and mesenchymal proliferation after induction of the neural crest. Integrating mouse genetics with single-cell RNA sequencing, our results reveal that conditional knockout of Eed after neural crest cell induction causes severe craniofacial hypoplasia, impaired craniofacial osteogenesis, and attenuated craniofacial mesenchymal cell proliferation that is first evident in post-migratory neural crest cell populations. We show that Eed drives mesenchymal differentiation and proliferation in vivo and in primary craniofacial cell cultures by regulating diverse transcription factor programs that are required for specification of post-migratory neural crest cells. These data enhance understanding of epigenetic mechanisms that underlie craniofacial development, and shed light on the embryonic, cellular, and molecular drivers of rare congenital syndromes in humans.