Histone H1 is an abundant and essential component of chromatin whose precise role in regulating gene expression is poorly understood. Here, we report that a major target of H1-mediated regulation in embryonic stem (ES) cells is the X-linked Rhox homeobox gene cluster. To address the underlying mechanism, we examined the founding member of the Rhox gene cluster-Rhox5-and found that its distal promoter (Pd) loses H1, undergoes demethylation, and is transcriptionally activated in response to loss of H1 genes in ES cells. Demethylation of the Pd is required for its transcriptional induction and we identified a single cytosine in the Pd that, when methylated, is sufficient to inhibit Pd transcription. Methylation of this single cytosine prevents the Pd from binding GA-binding protein (GABP), a transcription factor essential for Pd transcription. Thus, H1 silences Rhox5 transcription by promoting methylation of one of its promoters, a mechanism likely to extend to other H1-regulated Rhox genes, based on analysis of ES cells lacking DNA methyltransferases. The Rhox cluster genes targeted for H1-mediated transcriptional repression are also subject to another DNA methylation-regulated process: Xp imprinting. Remarkably, we found that only H1-regulated Rhox genes are imprinted, not those immune to H1-mediated repression. Together, our results indicate that the Rhox gene cluster is a major target of H1-mediated transcriptional repression in ES cells and that H1 is a candidate to have a role in Xp imprinting.