Oxidative stress induces genome-wide remodeling of the chromatin structure. In this study, we identify Methyl-CpG Binding Protein 4 (MBD4), a multifunctional enzyme involved in DNA demethylation, base excision repair, and gene expression regulation, as an essential factor in response to oxidative stress. We provide evidence that MBD4 is upregulated at the protein level upon oxidative stress, and that MBD4 is essential for cell survival following oxidative stress. In these cells, MBD4 and DNMT1 are recruited at sites of oxidation-induced DNA damage, where we speculate they participate in DNA repair. MBD4 and DNMT1 also share genomic targets in unstressed cells. Using genome-wide analysis of MBD4 binding sites, we identified new targets potentially co-regulated by MBD4 and DNA methylation. We identified two new binding sites for MBD4 and DNMT1 at methylated CpG islands of CDKN1A/p21 and MSH4, where they synergistically mediate transcriptional repression. Our study provides evidence that the interaction between DNMT1 and MBD4 is involved in controlling gene expression and responding to oxidative stress.