Histone-modifying systems play fundamental roles in gene regulation and the development of multicellular organisms. Histone modifications that are enriched at gene regulatory elements have been heavily studied, but the function of modifications found more broadly throughout the genome remains poorly understood. This is exemplified by histone H2A monoubiquitylation (H2AK119ub1), which is enriched at Polycomb-repressed gene promoters but also covers the genome at lower levels. Here, using inducible genetic perturbations and quantitative genomics, we found that the BAP1 deubiquitylase plays an essential role in constraining H2AK119ub1 throughout the genome. Removal of BAP1 leads to pervasive genome-wide accumulation of H2AK119ub1, which causes widespread reductions in gene expression. We show that elevated H2AK119ub1 preferentially counteracts Ser5 phosphorylation on the C-terminal domain of RNA polymerase II at gene regulatory elements and causes reductions in transcription and transcription-associated histone modifications. Furthermore, failure to constrain pervasive H2AK119ub1 compromises Polycomb complex occupancy at a subset of Polycomb target genes, which leads to their derepression, providing a potential molecular rationale for why the BAP1 ortholog in Drosophila has been characterized as a Polycomb group gene. Together, these observations reveal that the transcriptional potential of the genome can be modulated by regulating the levels of a pervasive histone modification.