The Microrchidia (MORC) ATPases are required for heterochromatin condensation and transposable element silencing in plants and animals. In plants, MORC proteins are required for the efficient RNA-directed DNA methylation (RdDM) at specific chromatin regions and have a function in plant response to biotic stress. Here we provide evidence linking MORC proteins with Polycomb-Repressive Complex 2 (PRC2) in chromatin regulation. We show that MORC proteins interact with PRC2 proteins and are required for efficient PRC2-binding,H3K27me3 and repression of rice genes. This function of MORC proteins is counteracted by ALKBH1, a DNA 6mA demethylase previously shown to impair PRC2 binding to a subset of the target. We find that OsMORC6b binding is enriched at gene transcriptional start sites, which overlaps largely with that of the PRC2 nucleation sites and co-localizes with fine scale chromatin boundaries delimitating H3K27me3 domains from open chromatin. We further show that rice MORC proteins are required to maintain RdDM at CHH sequences at the upstream promoter region of genes with H3K27me3 at the body region for repression. These findings are instructive for understanding MORC protein function in chromatin regulation in other eukaryotic organisms.