Epe1 is a JmjC domain protein that antagonizes heterochromatization in Schizosaccharomyces pombe. Related JmjC domain proteins catalyze a histone demethylation reaction that depends on Fe(II) and alpha-ketoglutarate. However, no detectable demethylase activity is associated with Epe1, and its JmjC domain lacks conservation of Fe(II)-binding residues. We report that Swi6 recruits Epe1 to heterochromatin and that overexpression of epe1(+), like mutations in silencing genes or overexpression of swi6(+), upregulates expression of certain genes. A significant overlap was observed between the lists of genes that are upregulated by overexpression of epe1(+) and those that are upregulated by mutations in histone deacetylase genes. However, most of the common genes are not regulated by Clr4 histone methyltransferase. This suggests that Epe1 interacts with the heterochromatin assembly pathway at the stage of histone deacetylation. Mutational inactivation of Epe1 downregulates similar to 12% of S. pombe genes, and the list of these genes overlaps significantly with the lists of genes that are upregulated by mutations in silencing genes and genes that are hyperacetylated at their promoter regions in clr6-1 mutants. We propose that an interplay between the repressive HDACs activity and Epe1 helps to regulate gene expression in S. pombe.