Dioxygenase that mediates demethylation of DNA and RNA containing 1-methyladenosine (m1A) (PubMed:12486230, PubMed:12594517, PubMed:16174769, PubMed:26863196, PubMed:26863410). Repairs alkylated DNA containing 1-methyladenosine (m1A) and 3-methylcytosine (m3C) by oxidative demethylation (PubMed:12486230, PubMed:12594517, PubMed:16174769, PubMed:25944111). Has a strong preference for single-stranded DNA (PubMed:12486230, PubMed:12594517, PubMed:16174769, PubMed:20714506). Able to process alkylated m3C within double-stranded regions via its interaction with ASCC3, which promotes DNA unwinding to generate single-stranded substrate needed for ALKBH3 (PubMed:22055184). Can repair exocyclic 3,N4-ethenocytosine adducs in single-stranded DNA (PubMed:25797601). Also acts on RNA (PubMed:12594517, PubMed:16174769, PubMed:26863196, PubMed:26863410, PubMed:16858410). Demethylates N(1)-methyladenosine (m1A) RNA, an epigenetic internal modification of messenger RNAs (mRNAs) highly enriched within 5'-untranslated regions (UTRs) and in the vicinity of start codons (PubMed:26863196, PubMed:26863410). Requires molecular oxygen, alpha-ketoglutarate and iron (PubMed:22055184, PubMed:16858410). 2-oxoglutarate + an N(1)-methyladenosine in mRNA + O2 = an adenosine in mRNA + CO2 + formaldehyde + succinate 2-oxoglutarate + a methylated nucleobase within DNA + O2 = a nucleobase within DNA + CO2 + formaldehyde + succinate 2-oxoglutarate + an N(1)-methyl-2'-deoxyadenosine in single-stranded DNA + O2 = a 2'-deoxyadenosine in single-stranded DNA + CO2 + formaldehyde + H(+) + succinate 2-oxoglutarate + an N(3)-methyl-2'-deoxycytidine in single-stranded DNA + O2 = a 2'-deoxycytidine in single-stranded DNA + CO2 + formaldehyde + H(+) + succinate 2-oxoglutarate + a 3,N(4)-etheno-2'-deoxycytidine in single-stranded DNA + H2O + O2 = a 2'-deoxycytidine in single-stranded DNA + CO2 + glyoxal + succinate Binds 1 Fe(2+) ion per subunit. Activated by ascorbate. Interacts with the ASCC complex composed of ASCC1, ASCC2 and ASCC3 (PubMed:29144457, PubMed:22055184). Interacts directly with ASCC3, and is thereby recruited to the ASCC complex (PubMed:22055184, PubMed:29144457). Interacts with OTUD4; the interaction is direct (PubMed:25944111). Interacts with USP7 and USP9X (PubMed:25944111). Colocalizes with ASCC2 and ASCC3 in nuclear foci when cells have been exposed to alkylating agents that cause DNA damage (PubMed:29144457). Predominantly localizes to the nucleus. Ubiquitous. Detected in heart, pancreas, skeletal muscle, thymus, testis, ovary, spleen, prostate, small intestine, peripheral blood leukocytes, urinary bladder and colon. Ubiquitinated; undergoes 'Lys-48'-linked polyubiquitination. OTUD4 promotes USP7 and USP9X-dependent deubiquitination of 'Lys-48'-polyubiquitinated ALKBH3 promoting the repair of alkylated DNA lesions. Belongs to the alkB family.