Transcription is tightly coordinated by different regulators that recruit the transcription machinery and ensure its appropriate speed and processivity. The C-terminal domain (CTD) of the largest subunit of RNA polymerase II (Pol II) is differentially phosphorylated during transcription to govern dynamic binding of regulatory factors. We identified SPOC as a new Pol II CTD-binding domain found in the human PHD-finger protein 3 (PHF3). The X-ray structure of PHF3 SPOC shows that two positively charged patches on the SPOC surface anchor two pSer2 phospho groups from adjacent CTD repeats, indicating that PHF3 SPOC interacts with elongating Pol II. Functional analysis of PHF3 in HEK293T WT and KO cells showed that PHF3 tracks with Pol II across the length of genes, modulates Pol II elongation rate, and regulates transcription of neuronal genes. PHF3 knock-out in mouse ES cells impairs neuronal differentiation due to premature expression of neuronal transcription factors. Our study establishes PHF3 as the first transcription regulator that directly binds to Pol II CTD in a SPOC-dependent manner and modulates neural gene expression to ensure proper neuronal differentiation.