The neuronal gene repressor REST/NRSF recruits corepressors, including CoREST, to modify histones and repress transcription. REST also functions as a tumor suppressor, but the mechanism remains unclear. We identified chromodomain on Y-like (CDYL) as a REST corepressor that physically bridges REST and the histone methylase G9a to repress transcription. Importantly, RNAi knockdown of REST, CDYL, and G9a, but not CoREST, induced oncogenic transformation of immortalized primary human cells and derepression of the proto-oncogene TrkC. Significantly, transgenic expression of TrkC also induced transformation. This implicates CDYL-G9a, but not CoREST, in REST suppression of transformation, possibly by oncogene repression. CDYL knockdown also augments transformation in a cell culture model of cervical cancer, where loss of heterozygosity of the CDYL locus occurs. These findings demonstrate molecular strategies by which REST carries out distinct biological functions via different corepressors and provide critical insights into the role of histone-modifying complexes in regulating cellular transformation.