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 approximately 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.