LAUSR

The C-terminal domain (CTD) of the largest subunit of RNA polymerase II (Pol II) is a regulatory hub for transcription and RNA processing. Here, we identify PHD-finger protein 3 (PHF3) as a regulator of transcription and mRNA stability that docks onto Pol II CTD through its SPOC domain. We characterize SPOC as a CTD reader domain that preferentially binds two phosphorylated Serine-2 marks in adjacent CTD repeats. PHF3 drives liquid-liquid phase separation of phosphorylated Pol II, colocalizes with Pol II clusters and tracks with Pol II across the length of genes. PHF3 knock-out or SPOC deletion in human cells results in increased Pol II stalling, reduced elongation rate and an increase in mRNA stability, with marked derepression of neuronal genes. Key neuronal genes are aberrantly expressed in Phf3 knock-out mouse embryonic stem cells, resulting in impaired neuronal differentiation. Our data suggest that PHF3 acts as a prominent effector of neuronal gene regulation by bridging transcription with mRNA decay.