While large multimodal models (LMMs) have achieved remarkable progress, generating pixel-level masks for image reasoning tasks involving multiple open-world targets remains a challenge. To bridge this gap, we introduce PixelLM, an effective and efficient LMM for pixel-level reasoning and understanding. Central to PixelLM are a novel, lightweight pixel decoder and a comprehensive segmentation codebook. The decoder efficiently produces masks from the hidden embeddings of the codebook tokens, which encode detailed target-relevant information. With this design, PixelLM harmonizes with the structure of popular LMMs and avoids the need for additional costly segmentation models. Furthermore, we propose a token fusion method to enhance the model's ability to differentiate between multiple targets, leading to substantially improved mask quality. To advance research in this area, we construct MUSE, a high-quality multi-target reasoning segmentation benchmark. PixelLM excels across various pixel-level image reasoning and understanding tasks, outperforming well-established methods in multiple benchmarks, including MUSE, and multi-referring segmentation. Comprehensive ablations confirm the efficacy of each proposed component. All code, models, and datasets will be publicly available.