Methylation of histone H3 Lys 9 and Lys 27 (H3K9 and H3K27) is associated with transcriptional silencing. Here we show that KDM7, a JmjC domain-containing protein, catalyzes demethylation of both mono- or dimethylated H3K9 and H3K27. Inhibition of KDM7 orthologs in zebrafish resulted in developmental brain defects. KDM7 interacts with the follistatin gene locus, and KDM7 depletion in mammalian neuronal cells suppressed follistatin gene transcription in association with increased levels of dimethylated H3K9 and H3K27. Our findings identify KDM7 as a dual demethylase for H3K9 and H3K27 that functions as an eraser of silencing marks on chromatin during brain development.