Epigenetic modifications influence gene expression and provide a unique mechanism for fine-tuning cellular differentiation and development in multicellular organisms. Here we report on the biological functions of UTX-1, the Caenorhabditis elegans homologue of mammalian UTX, a histone demethylase specific for H3K27me2/3. We demonstrate that utx-1 is an essential gene that is required for correct embryonic and postembryonic development. Consistent with its homology to UTX, UTX-1 regulates global levels of H3K27me2/3 in C. elegans. Surprisingly, we found that the catalytic activity is not required for the developmental function of this protein. Biochemical analysis identified UTX-1 as a component of a complex that includes SET-16(MLL), and genetic analysis indicates that the defects associated with loss of UTX-1 are likely mediated by compromised SET-16/UTX-1 complex activity. Taken together, these results demonstrate that UTX-1 is required for many aspects of nematode development; but, unexpectedly, this function is independent of its enzymatic activity.