During differentiation and development cells undergo dramatic morphological, and functional changes without any change in the DNA sequence. The underlying changes of gene expression patterns are established and maintained by epigenetic processes. Early mechanistic insights came from the observation that gene activity and repression states correlate with the DNA methylation level of their promoter region. DNA methylation is a postreplicative modification that occurs exclusively at the C5 position of cytosine residues (5mC) and predominantly in the context of CpG dinucleotides in vertebrate cells. Here, three major DNA methyltransferases (Dnmt1, 3a, and 3b) establish specific DNA methylation patterns during differentiation and maintain them over many cell division cycles. CpG methylation is recognized by at least three protein families that in turn recruit histone modifying and chromatin remodeling enzymes and thus translate DNA methylation into repressive chromatin structures. By now a multitude of histone modifications have been linked in various ways with DNA methylation. We will discuss some of the basic connections and the emerging complexity of these regulatory networks.