The chromobox 7 (CBX7) protein of the polycomb repressive complex 1 (PRC1) functions to repress transcription of tumor suppressor p16^INK4a through long noncoding RNA, ANRIL (antisense noncoding RNA in the INK4 locus) directed chromodomain (ChD) binding to trimethylated lysine 27 of histone H3 (H3K27me3), resulting in chromatin compaction at the INK4a/ARF locus. In this study, we report structure-guided discovery of two distinct classes of small-molecule antagonists for the CBX7ChD. Our Class A compounds, a series including analogues of the previously reported MS452, inhibit CBX7ChD/methyl-lysine binding by occupying the H3K27me3 peptide binding site, whereas our Class B compound, the newly discovered MS351, appears to inhibit H3K27me3 binding when CBX7ChD is bound to RNA. Our crystal structure of the CBX7ChD/MS351 complex reveals the molecular details of ligand recognition by the aromatic cage residues that typically engage in methyl-lysine binding. We further demonstrate that MS351 effectively induces transcriptional derepression of CBX7 target genes, including p16^INK4a in mouse embryonic stem cells and human prostate cancer PC3 cells. Thus, MS351 represents a new class of ChD antagonists that selectively targets the biologically active form of CBX7 of the PRC1 in long noncoding RNA- and H3K27me3-directed gene transcriptional repression.