The DNMT1 CXXC domain senses CpG islands for DNA methylation inhibition.

DNA methyltransferase DNMT1 plays an essential role in maintaining DNA methylation homeostasis. While DNMT1-mediated DNA methylation mainly occurs outside the active chromatin domains, such as CpG islands, how DNMT1 interplays with hypomethylated nucleosome environment to restrict CpG island methylation remains unclear. Here we report the structure of DNMT1 with a nucleosome containing unmodified CpG sites. The interaction of the DNMT1 CXXC domain with the unmodified CpG sites within the nucleosome core or the linker strengthens the DNMT1-nucleosome association, which contributes to the enrichment of DNMT1 in CpG islands. On the other hand, the CXXC domain is positioned in a manner that blocks the target recognition domain of DNMT1 from accessing potential DNA substrates. Consistently, disrupting the CXXC-CpG interaction leads to DNMT1 hyperactivity on nucleosomes with unmodified CpG sites, or those with spatially proximate unmodified and hemimethylated CpG sites. Furthermore, our whole-genome bisulfite-sequencing analysis reveals that introducing the CXXC-CpG interaction-defective DNMT1 mutation leads to substantial increase in CpG island methylation but not so much in overall genomic methylation, causing severe defects in transcriptional programming and stem cell differentiation. Together, this study establishes a role for the CXXC domain in safeguarding the CpG island hypomethylation, vital to DNA methylation homeostasis during development.