Rph1 and Gis1 are two related yeast zinc finger proteins that function as downstream effectors in the Ras/PKA, TOR and Sch9 nutrient signaling pathways. Both proteins also contain JmjC histone demethylase domains, but only Rph1 is known to be an active enzyme, demethylating lysine 36 of histone H3. We have studied to what extent the demethylase activity of Rph1 contributes to its role in nutrient signaling by performing gene expression microarray experiments on a yeast strain containing a catalytically inactive allele of RPH1. We find that the enzymatic activity of Rph1 is not essential for its role in growth phase dependent gene regulation. However, the ability of Rph1 to both activate and repress transcription is partially impaired in the active site mutant, indicating that the demethylase activity may enhance its function in vivo. Consistent with this, we find that the Rph1 mutation and a deletion of the histone H3 methylase Set2 affect the same target genes in opposite directions. Genes that are differentially expressed in the Rph1 mutant are also enriched for binding of Rpd3, a downstream effector in silencing, to their promoters. The expression of some subtelomeric genes and genes involved in sporulation and meiosis are also affected by the mutation, suggesting a role for Rph1-dependent demethylation in regulating these genes. A small set of genes are more strongly affected by the active site mutation, indicating a more pronounced role for the demethylase activity in their regulation by Rph1.