The demethylation of histone lysine residues, one of the most important modifications in transcriptional regulation, is associated with various physiological states. KDM2B is a demethylase of histones H3K4, H3K36, and H3K79 and is associated with the repression of transcription. Here, we present a novel mechanism by which KDM2B demethylates serum response factor (SRF) K165 to negatively regulate muscle differentiation, which is counteracted by the histone methyltransferase SET7. We show that KDM2B inhibited skeletal muscle differentiation by inhibiting the transcription of SRF-dependent genes. Both KDM2B and SET7 regulated the balance of SRF K165 methylation. SRF K165 methylation was required for the transcriptional activation of SRF and for the promoter occupancy of SRF-dependent genes. SET7 inhibitors blocked muscle cell differentiation. Taken together, these data indicate that SRF is a nonhistone target of KDM2B and that the methylation balance of SRF as maintained by KDM2B and SET7 plays an important role in muscle cell differentiation.