Synovial sarcoma is a soft tissue malignancy characterized by the fusion of SS18 to either SSX1, SSX2, or SSX4 genes. SS18 and SSX are transcriptional cofactors involved in activation and repression of gene transcription, respectively. SS18 interacts with SWI/SNF, whereas SSX associates with the polycomb chromatin remodeling complex. Thus, fusion of these two proteins brings together two opposing effects on gene expression and chromatin structure. Recent studies have shown that a significant number of genes are down-regulated by the SS18-SSX fusion protein and that the clinically applicable histone deacetylase (HDAC) inhibitor romidepsin inhibits synovial sarcoma growth. Therefore, we set out to identify direct targets of SS18-SSX among genes down-regulated in synovial sarcoma and investigated if romidepsin can specifically counteract SS18-SSX-mediated transcriptional dysregulation. Here, we report that the tumor suppressor early growth response 1 (EGR1) is repressed by the SS18-SSX protein through a direct association with the EGR1 promoter. This SS18-SSX binding correlates with trimethylation of Lys(27) of histone H3 (H3K27-M3) and recruitment of polycomb group proteins to this promoter. In addition, we found that romidepsin treatment reverts these modifications and reactivates EGR1 expression in synovial sarcoma cell models. Our data implicate polycomb-mediated epigenetic gene repression as a mechanism of oncogenesis in synovial sarcoma. Furthermore, our work highlights a possible mechanism behind the efficacy of a clinically applicable HDAC inhibitor in synovial sarcoma treatment.