Histone lysine methylation is an important component of the epigenetic system demarcating transcriptionally active and inactive chromatin domains. It is of primary importance in understanding how different histone lysine methylation marks and a specific combination of them are read and interpreted by chromatin proteins to regulate gene expression. In this paper, we report that the rice CHD3 protein CHR729 that was required for many aspects of plant development can interact with dimethylated histone H3 lysine 4 (H3K4me2, a mark associated with moderately expressed or repressed genes) and with trimethylated histone H3 lysine 27 (H3K27me3, a mark associated with repressed genes), respectively, through the chromodomains and the plant homeodomain (PHD) finger of the protein. A mutation or down-regulation of the gene provoked a decrease of H3K27me3 and H3K4me3 (a mark associated with active genes). Genome-wide analysis revealed that H3K27me3 and H3K4me3, respectively, were lost from about 56 and 23% of marked loci, which correspond mostly to under-expressed or repressed genes. In the mutant, a higher-than-expected proportion of down-regulated genes lost H3K4me3, among which many encode DNA-binding transcription factors. These results suggest that the rice CHD3 protein is a bifunctional chromatin regulator able to recognize and modulate H3K4 and H3K27 methylation over repressed or tissue-specific genes, which may be associated with regulation of a gene transcription program of plant development.