Pygopus 2 (Pygo2) is a coactivator of Wnt/β-catenin signaling that can bind bi- or trimethylated lysine 4 of histone-3 (H3K4me ^2/3 ) and participate in chromatin reading and writing. It remains unknown whether the Pygo2-H3K4me ^2/3 association has a functional relevance in breast cancer progression in vivo. To investigate the functional relevance of histone-binding activity of Pygo2 in malignant progression of breast cancer, we generated a knock-in mouse model where binding of Pygo2 to H3K4me ^2/3 was rendered ineffective. Loss of Pygo2-histone interaction resulted in smaller, differentiated, and less metastatic tumors, due, in part, to decreased canonical Wnt/β-catenin signaling. RNA- and ATAC-sequencing analyses of tumor-derived cell lines revealed downregulation of TGFβ signaling and upregulation of differentiation pathways such as PDGFR signaling. Increased differentiation correlated with a luminal cell fate that could be reversed by inhibition of PDGFR activity. Mechanistically, the Pygo2-histone interaction potentiated Wnt/β-catenin signaling, in part, by repressing the expression of Wnt signaling antagonists. Furthermore, Pygo2 and β-catenin regulated the expression of miR-29 family members, which, in turn, repressed PDGFR expression to promote dedifferentiation of wild-type Pygo2 mammary epithelial tumor cells. Collectively, these results demonstrate that the histone binding function of Pygo2 is important for driving dedifferentiation and malignancy of breast tumors, and loss of this binding activates various differentiation pathways that attenuate primary tumor growth and metastasis formation. Interfering with the Pygo2-H3K4me ^2/3 interaction may therefore serve as an attractive therapeutic target for metastatic breast cancer. SIGNIFICANCE: Pygo2 represents a potential therapeutic target in metastatic breast cancer, as its histone-binding capability promotes β-catenin-mediated Wnt signaling and transcriptional control in breast cancer cell dedifferentiation, EMT, and metastasis.