DNA methylation is a major epigenetic modification in the genomes of higher eukaryotes. In vertebrates, DNA methylation occurs predominantly on the CpG dinucleotide, and approximately 60% to 90% of these dinucleotides are modified. Distinct DNA methylation patterns, which can vary between different tissues and developmental stages, exist on specific loci. Sites of DNA methylation are occupied by various proteins, including methyl-CpG binding domain (MBD) proteins which recruit the enzymatic machinery to establish silent chromatin. Mutations in the MBD family member MeCP2 are the cause of Rett syndrome, a severe neurodevelopmental disorder, whereas other MBDs are known to bind sites of hypermethylation in human cancer cell lines. Here, we review the advances in our understanding of the function of DNA methylation, DNA methyltransferases, and methyl-CpG binding proteins in vertebrate embryonic development. MBDs function in transcriptional repression and long-range interactions in chromatin and also appear to play a role in genomic stability, neural signaling, and transcriptional activation. DNA methylation makes an essential and versatile epigenetic contribution to genome integrity and function. © The Author(s) 2009.