Although the role of H3K9 methylation in rice (Oryza sativa) is unclear, in Arabidopsis thaliana the loss of histone H3K9 methylation by mutation of Kryptonite [also known as SU(VAR)3-9 homolog] reduces genome-wide DNA methylation and increases the transcription of transposable elements. Here, we report that rice SDG714 (for SET Domain Group Protein714) encodes a histone H3K9-specific methyltransferase. The C terminus of SDG714 confers enzymatic activity and substrate specificity, whereas the N terminus localizes it in the nucleus. Loss-of-function mutants of SDG714 (SDG714IR transformants) generated by RNA interference display a mostly glabrous phenotype as a result of the lack of macro trichomes in glumes, leaves, and culms compared with control plants. These mutants also show decreased levels of CpG and CNG cytosine methylation as well as H3K9 methylation at the Tos17 locus, a copia-like retrotransposon widely used for the generation of rice mutants. Most interestingly, loss of function of SDG714 can enhance transcription and cause the transposition of Tos17. Together, these results suggest that histone H3K9 methylation mediated by SDG714 is involved in DNA methylation, the transposition of transposable elements, and genome stability in rice.