Mutations in PHF8 are associated with X-linked mental retardation and cleft lip/cleft palate. PHF8 contains a plant homeodomain (PHD) in its N terminus and is a member of a family of JmjC domain-containing proteins. While PHDs can act as methyl lysine recognition motifs, JmjC domains can catalyze lysine demethylation. Here, we show that PHF8 is a histone demethylase that removes repressive histone H3 dimethyl lysine 9 marks. Our biochemical analysis revealed specific association of the PHF8 PHD with histone H3 trimethylated at lysine 4 (H3K4me3). Chromatin immunoprecipitation followed by high-throughput sequencing indicated that PHF8 is enriched at the transcription start sites of many active or poised genes, mirroring the presence of RNA polymerase II (RNAPII) and of H3K4me3-bearing nucleosomes. We show that PHF8 can act as a transcriptional coactivator and that its activation function largely depends on binding of the PHD to H3K4me3. Furthermore, we present evidence for direct interaction of PHF8 with the C-terminal domain of RNAPII. Importantly, a PHF8 disease mutant was defective in demethylation and in coactivation. This is the first demonstration of a chromatin-modifying enzyme that is globally recruited to promoters through its association with H3K4me3 and RNAPII.