Progenitors must expand sufficiently to achieve final tissue size, while retaining chromatin flexible enough to produce multiple cell types yet receptive to external signals. The Drosophila follicle cell stem cell (FSC) generates daughters that divide nine times to generate a large progenitor pool ideally suited for studying progenitor differentiation. Previously, we showed that antagonistic actions between lysine-specific demethylase 1 (Lsd1) and Trithorax (TRX) methyltransferase dynamically modulate methylation levels at histone lysine 4 (H3K4) to maintain plastic epigenetic states in early progenitors that are crucial for proliferation and to time differentiation (Lee and Spradling (2014) Genes Dev . 28, 2729). Here, we further report a coordinated interaction between an Lsd1 complex and Polycomb Repressive Complex 2 (PRC2) that modifies chromatin states to time progenitor differentiation. All three PRC2 core components (i.e., E(z), ESC and Su(z)12) regulate epigenetic plasticity and modulate progenitor competence during follicle progenitor differentiation. Moreover, our evidence suggests that the Lsd1 complex and PRC2 are coordinated by noncoding RNAs. These results argue that poised chromatin states are dynamically modulated by regulating methylation levels at H3K4 and H3K27 to control cell proliferation and competence during progenitor differentiation.