During the emergence of multicellular eukaryotes, genomes evolved to become organizationally and informationally more complex. This required more sophisticated chromatin-based mechanisms to regulate patterns of gene expression, and we and others have shown that the histone variant H2A.Z underpins many of these evolved chromatin functions. We investigated the oncogenic role of H2A.Z by inhibiting its expression in a human metastatic breast model system before transplanting these cells into immunodeficient mice. Unexpectedly, cellular proliferation, colony formation, and cell migration were stimulated by the loss of H2A.Z in vitro. Significantly, the injection of these H2A.Z-depleted breast cancer cells into nude mice yielded tumors that were more aggressive compared with control cells. This is explained by the observation that in the absence of H2A.Z, the cancer-specific gene expression pathways involving c-Myc were activated in vitro, and these same pathways remained active in all tumours. Remarkably, these cancer pathways remained activated despite the subsequent reactivation of H2A.Z expression during tumour formation. This observation is consistent with the role of H2A.Z in cellular epigenetic memory. We found that H2A.Z recruits HP1b to c-Myc target genes in breast cancer cells to inhibit their gene expression. Finally, we employed a differential MNase approach to determine the sensitivity of a nucleosome to MNase digestion as a measure of chromatin accessibility at Pol II promoters. Remarkably, a feature of H2A.Z-HP1-containing chromatin at repressed promoters is an increase rather than a decrease in MNase accessibility, suggesting that some degree of nucleosome unwrapping is required for the formation of repressed chromatin. Supporting this hypothesis, H2A.Z MNase-sensitive nucleosomes are found in repressed chromatin B compartments and subcompartments, which is disrupted upon the loss of H2A.Z. Taken together, our data challenge the view that H2A.Z is an oncohistone, but rather cooperates with HP1b to reduce the expression of genes required for tumor formation.