Rearrangement of the 1q12 pericentromeric heterochromatin and subsequent amplification of the 1q arm is commonly associated with cancer development and progression and may result from epigenetic deregulation. In many premalignant and malignant cells, loss of 1q12 satellite DNA methylation causes the deposition of polycomb factors and formation of large polycomb aggregates referred to as polycomb bodies. Here, we show that SSX proteins can destabilize 1q12 pericentromeric heterochromatin in melanoma cells when it is present in the context of polycomb bodies. We found that SSX proteins deplete polycomb bodies and promote the unfolding and derepression of 1q12 heterochromatin during replication. This further leads to segregation abnormalities during anaphase and generation of micronuclei. The structural rearrangement of 1q12 pericentromeric heterochromatin triggered by SSX2 is associated with loss of polycomb factors, but is not mediated by diminished polycomb repression. Instead, our studies suggest a direct effect of SSX proteins facilitated though a DNA/chromatin binding, zinc finger-like domain and a KRAB-like domain that may recruit chromatin modifiers or activate satellite transcription. Our results demonstrate a novel mechanism for generation of 1q12-associated genomic instability in cancer cells.