It is shown that 2+1 dimensional quantum Yang-Mills theory, with an action consisting purely of the Chern-Simons term, is exactly soluble and gives a natural framework for understanding the Jones polynomial of knot theory in three dimensional terms. In this version, the Jones polynomial can be generalized fromS ³ to arbitrary three manifolds, giving invariants of three manifolds that are computable from a surgery presentation. These results shed a surprising new light on conformal field theory in 1+1 dimensions.