In this paper we propose a two-stage statistical method, called ChIPnorm, to normalize ChIP-seq data, and to find differential regions in the genome, given two libraries of histone modifications of different cell types. We show that the ChIPnorm method removes most of the noise and bias in the data and outperforms other normalization methods. We correlate the histone marks with gene expression data and confirm that histone modifications H3K27me3 and H3K4me3 act as respectively a repressor and an activator of genes. Compared to what was previously reported in the literature, we find that a substantially higher fraction of bivalent marks in ES cells for H3K27me3 and H3K4me3 move into a K27-only state. We find that most of the promoter regions in protein-coding genes have differential histone-modification sites.