DNA methylation is an epigenetic mechanism that has important functions in transcriptional silencing and is associated with repressive histone methylation (H3K9me). To further investigate silencing mechanisms, we screened a mutagenized Arabidopsis thaliana population for expression of SDCpro-GFP, redundantly controlled by DNA methyltransferases DRM2 and CMT3. Here, we identify the hypomorphic mutant mthfd1-1, carrying a mutation (R175Q) in the cytoplasmic bifunctional methylenetetrahydrofolate dehydrogenase/methenyltetrahydrofolate cyclohydrolase (MTHFD1). Decreased levels of oxidized tetrahydrofolates in mthfd1-1 and lethality of loss-of-function demonstrate the essential enzymatic role of MTHFD1 in Arabidopsis. Accumulation of homocysteine and S-adenosylhomocysteine, genome-wide DNA hypomethylation, loss of H3K9me and transposon derepression indicate that S-adenosylmethionine-dependent transmethylation is inhibited in mthfd1-1. Comparative analysis of DNA methylation revealed that the CMT3 and CMT2 pathways involving positive feedback with H3K9me are mostly affected. Our work highlights the sensitivity of epigenetic networks to one-carbon metabolism due to their common S-adenosylmethionine-dependent transmethylation and has implications for human MTHFD1-associated diseases.