DNA methylation was first described almost a century ago; however, the rules governing its establishment and maintenance remain elusive. Here we present data demonstrating that active transcription regulates levels of genomic methylation. We identify a novel RNA arising from the CEBPA gene locus that is critical in regulating the local DNA methylation profile. This RNA binds to DNMT1 and prevents CEBPA gene locus methylation. Deep sequencing of transcripts associated with DNMT1 combined with genome-scale methylation and expression profiling extend the generality of this finding to numerous gene loci. Collectively, these results delineate the nature of DNMT1–RNA interactions and suggest strategies for gene-selective demethylation of therapeutic targets in human diseases.