X-linked mental retardation (XLMR) is a complex human disease that causes intellectual disability. Causal mutations have been found in approximately 90 X-linked genes; however, molecular and biological functions of many of these genetically defined XLMR genes remain unknown. PHF8 (PHD (plant homeo domain) finger protein 8) is a JmjC domain-containing protein and its mutations have been found in patients with XLMR and craniofacial deformities. Here we provide multiple lines of evidence establishing PHF8 as the first mono-methyl histone H4 lysine 20 (H4K20me1) demethylase, with additional activities towards histone H3K9me1 and me2. PHF8 is located around the transcription start sites (TSS) of ∼7,000 RefSeq genes and in gene bodies and intergenic regions (non-TSS). PHF8 depletion resulted in upregulation of H4K20me1 and H3K9me1 at the TSS and H3K9me2 in the non-TSS sites, respectively, demonstrating differential substrate specificities at different target locations. PHF8 positively regulates gene expression, which is dependent on its H3K4me3-binding PHD and catalytic domains. Importantly, patient mutations significantly compromised PHF8 catalytic function. PHF8 regulates cell survival in the zebrafish brain and jaw development, thus providing a potentially relevant biological context for understanding the clinical symptoms associated with PHF8 patients. Lastly, genetic and molecular evidence supports a model whereby PHF8 regulates zebrafish neuronal cell survival and jaw development in part by directly regulating the expression of the homeodomain transcription factor MSX1/MSXB, which functions downstream of multiple signalling and developmental pathways. Our findings indicate that an imbalance of histone methylation dynamics has a critical role in XLMR.