The chromatin modifier PRDM2/RIZ1 is inactivated by mutation in several forms of cancer and is a putative tumor suppressor gene. Frameshift mutations in the C-terminal region of PRDM2, affecting (A)8 or (A)9 repeats within exon 8, are found in one third of colorectal cancers with microsatellite instability, but the contribution of these mutations to colorectal tumorigenesis is unknown. To model somatic mutations in microsatellite unstable tumors, we devised a general approach to perform genome editing while stabilizing the mutated nucleotide repeat. We then engineered isogenic cell systems where the PRDM2 c.4467delA mutation in human HCT116 colorectal cancer cells was corrected to wild-type by genome editing. Restored PRDM2 increased global histone 3 lysine 9 dimethylation and reduced migration, anchorage-independent growth and tumor growth in vivo. Gene set enrichment analysis revealed regulation of several hallmark cancer pathways, particularly of epithelial-to-mesenchymal transition (EMT), with VIM being the most significantly regulated gene. These observations provide direct evidence that PRDM2 c.4467delA is a driver mutation in colorectal cancer and confirms PRDM2 as a cancer gene, pointing to regulation of EMT as a central aspect of its tumor suppressive action.