H3K36 methylation by Set2 targets Rpd3S histone deacetylase to transcribed regions of mRNA genes, repressing internal cryptic promoters and slowing elongation. Here we explore the function of this pathway by analysing transcription in yeast undergoing a series of carbon source shifts. Approximately 80 mRNA genes show increased induction upon SET2 deletion. A majority of these promoters have overlapping lncRNA transcription that targets H3K36me3 and deacetylation by Rpd3S to the mRNA promoter. We previously reported a similar mechanism for H3K4me2-mediated repression via recruitment of the Set3C histone deacetylase. Here we show that the distance between an mRNA and overlapping lncRNA promoter determines whether Set2-Rpd3S or Set3C represses. This analysis also reveals many previously unreported cryptic ncRNAs induced by specific carbon sources, showing that cryptic promoters can be environmentally regulated. Therefore, in addition to repression of cryptic transcription and modulation of elongation, H3K36 methylation maintains optimal expression dynamics of many mRNAs and ncRNAs.