Epigenetic regulators are often hijacked by cancer cells to sustain malignant phenotypes. How cells repurpose key regulators of cell identity as tumour-promoting factors is unclear. The antithetic role of the Polycomb component EZH2 in normal brain and glioma provides a paradigm to dissect how wild-type chromatin modifiers gain a pathological function in cancer. Here, we show that oncogenic signalling induces redistribution of EZH2 across the genome, and through misregulation of homeotic genes corrupts the identity of neural cells. Characterisation of EZH2 targets in de novo transformed cells, combined with analysis of glioma patient datasets and cell lines, reveals that acquisition of tumorigenic potential is accompanied by a transcriptional switch involving de-repression of spinal cord-specifying HOX genes and concomitant silencing of the empty spiracles homologue EMX2, a critical regulator of neurogenesis in the forebrain. Maintenance of tumorigenic potential by glioblastoma cells requires EMX2 repression, since forced EMX2 expression prevents tumour formation. Thus, by redistributing EZH2 across the genome, cancer cells subvert developmental transcriptional programmes that specify normal cell identity and remove physiological breaks that restrain cell proliferation.