The recent discovery of a large number of histone demethylases suggests a central role for these enzymes in regulating histone methylation dynamics. Histone H3K27 trimethylation (H3K27me3) has been linked to polycomb-group-protein-mediated suppression of Hox genes and animal body patterning, X-chromosome inactivation and possibly maintenance of embryonic stem cell (ESC) identity. An imbalance of H3K27 methylation owing to overexpression of the methylase EZH2 has been implicated in metastatic prostate and aggressive breast cancers. Here we show that the JmjC-domain-containing related proteins UTX and JMJD3 catalyse demethylation of H3K27me3/2. UTX is enriched around the transcription start sites of many HOX genes in primary human fibroblasts, in which HOX genes are differentially expressed, but is selectively excluded from the HOX loci in ESCs, in which HOX genes are largely silent. Consistently, RNA interference inhibition of UTX led to increased H3K27me3 levels at some HOX gene promoters. Importantly, morpholino oligonucleotide inhibition of a zebrafish UTX homologue resulted in mis-regulation of hox genes and a striking posterior developmental defect, which was partially rescued by wild-type, but not by catalytically inactive, human UTX. Taken together, these findings identify a small family of H3K27 demethylases with important, evolutionarily conserved roles in H3K27 methylation regulation and in animal anterior-posterior development.